This is also a similar concept with the same wording in the world of
Universal Life Insurance. It's also sometimes called
Rear-End Load, but that sounds even worse, doesn't it?
Most Universal Life policies will have surrender charges which disappear over the course of 15 years. Thus, as long as you maintain the policy, you aren't charged fees over and above the cost of the insurance. However, if you drop the policy during this 15 year window, you will be charged pro rata for the surrender.
A typical example would be this: At the end of 10 years, a policyholder has accumulated $10,000 in actual cash value in his Universal Life policy. However, the Surrender Cash Value is (say) $8,000. Thus, the Surrender Charge is $2,000.
This is where the Life Insurance Company makes its money; just like the banks who issue Certificates of Deposit for, say, three years. They know almost exactly how many folks will want their money before the three year period is up. If every policyholder kept their Universal Life policy for at least 15 years, the rates would go up on everyone else. And, if every banking customer who took out a 3-year CD left it in there the entire three years, the rate of return would go down for everyone else.
It's just business. Quit your bitching.