When are surrender charges waived on many deferred annuity contracts?

Surrender charges are fees that a policyholder may incur when withdrawing funds from a deferred annuity before a specified period has elapsed. Many deferred annuity contracts provide certain conditions under which these surrender charges are waived.

The correct choice indicates that surrender charges are often waived when the annuitant dies or becomes disabled. This provision is included because it recognizes that death or disability imposes significant financial burdens and unforeseen circumstances on the annuitant or their beneficiaries. By waiving these charges in such situations, the contract becomes more compassionate and responsive to the annuitant's challenging financial needs.

In contrast, options such as unemployment or interest rate fluctuations do not typically trigger a waiver of surrender charges, as they are viewed as ordinary financial fluctuations rather than extraordinary circumstances. Additionally, surrender charges being waived due to cancellation within the first year is misleading, as typically these charges apply when withdrawals are made before the end of a designated surrender period, not necessarily just for cancellation itself.

Thus, the waiving of surrender charges upon death or disability serves to protect the interests of the annuitant's beneficiaries or the annuitant themselves during difficult times.