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Why It Is Not a Good Idea to Surrender Your Term Insurance Policy?

Term insurance is one of the best ways to secure your family’s financial future in the event of your death. One of the most effective ways to do this is by investing in a term insurance policy.




Six Reasons Why Surrendering Term Plan Is a Bad Idea

When it comes to financial planning, securing the future of your loved ones is paramount. One of the most effective ways to do this is by investing in a term insurance policy. However, there may come a time when you find yourself in a tight spot, facing financial difficulties, and contemplating surrendering your term insurance policy. At the same time, it might seem like a quick solution, but surrendering your policy is generally not a wise move. Let’s understand why.

A. Six Reasons Why Surrendering Term Plan Is a Bad Idea

Here are the detailed explanations of each reason.

1. Loss of Life Cover

The primary purpose of buying a term insurance policy is to provide financial protection to your family in case of your death. By surrendering your policy, you lose this vital cover and expose your family to the risk of financial hardship in your absence. Even if you have no liabilities or dependents at present, you may have them in the future.

For example, you may get married, have children, take a loan, or start a business. In such scenarios, having a term insurance policy can ensure that your family does not face any financial burden if something happens to you.

2. Higher Premiums for Buying a New Policy

If you surrender your term insurance policy and want to buy a new one later, you might have to pay higher premiums. This is because the premium amount depends on factors such as age, health, lifestyle, and medical history.

As you age, these factors may change and increase your risk profile. For example, one may develop some health issues, start smoking, or gain weight. These factors can make you ineligible for some policies or increase the premium rates for others. Therefore, retaining your existing term insurance policy and paying the premiums regularly is advisable.

3. Loss of Tax Benefits

One of the perks of investing in a term insurance policy is that you can avail of tax deductions on the premium payments under Section 80C of the Income Tax Act, 1961. The maximum ceiling on the deduction that you can claim is Rs. 1.5 lakhs per annum. By surrendering your policy, you lose term insurance tax benefits and have to pay more taxes on your income. Moreover, buying a new policy later may not get the same tax benefits as before.

Why It Is Not a Good Idea to Surrender Your Term Insurance Policy

4. Loss of Maturity Benefit (If Applicable)

Some term insurance policies offer a maturity benefit or return of premium option. This means that if you survive the policy term, you get back all or some of the premiums you have paid. This feature can make your term insurance policy more attractive and cost-effective. However, if you surrender your policy before the maturity date, you lose this benefit and forfeit all the premiums that you have paid.

5. Inadequate Alternative Investments

Some consider surrendering their term insurance policy to free up funds for alternative investments. While this may seem tempting, it is essential to evaluate whether the potential returns from these investments can genuinely replace the benefits of your insurance policy.

Most term plans offer substantial coverage at relatively low premiums. Surrendering your policy to invest in traditional instruments like Fixed Deposits or Mutual Funds might not provide the same level of financial protection. Moreover, investments carry inherent risks, and there is no guarantee that they will yield higher returns or be as secure as your insurance policy.

6. Missed Opportunity for Riders

Term insurance policies often offer riders or add-ons that can enhance your coverage. These riders, such as critical illness, accidental death, or waiver of premium, provide additional protection against specific risks.

When you surrender your term insurance policy, you forfeit the opportunity to avail yourself of these valuable riders. These riders can be instrumental in safeguarding your family’s financial well-being in case of unforeseen events, making it unwise to surrender your policy.

B. Conclusion

Term insurance is not just a financial product; it’s a safety net for your loved ones. A good term insurance plan is an amalgamation of affordable premiums, adequate coverage, suitable policy duration, and optional riders that cater to your specific needs.

Term insurance is one of the best ways to secure your family’s financial future in case of your death. Therefore, it is not advisable to surrender your term insurance policy unless there is a compelling reason to do so. Instead, you should continue paying the premiums and enjoy the benefits of your policy till the end of the term, so that you can enjoy peace of mind, secure in the knowledge that your loved ones will remain financially safeguarded in your absence.

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Tax Filing Advice: Self-employment Tax (IRS Form 1040)

In this post, we’ll show you how to fill out Form 1040 and offer some tips on how to minimize your tax obligations. Tax Filing Advice – Self-employment Tax – IRS Form 1040.




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Filing your taxes can be challenging, especially if you are a freelancer. As a freelancer, you are required to pay self-employment tax, maintain track of your revenues and expenses, and submit projected tax payments throughout the year. You can complete an IRS Form 1040 with a little help and a quarterly tax calculator, despite the fact that it could appear challenging. In this post, we’ll show you how to fill out Form 1040 and offer some tips on how to minimize your tax obligations.

1. Assemble Your Papers

Before you start filling out your Form 1040, you must gather all the necessary information and paperwork. Your W-2s, 1099s for any freelance work you did, receipts for any anticipated tax deductions, and any other financial records you might have are included in this. You must also include your Social Security number and the Social Security numbers of any dependents you wish to claim.

2. Verify Your Filing’s Status

Your file status affects your tax rate and the size of your standard deduction. Determine which filing status is appropriate for you based on your marital status, the number of dependents you have, and other factors.

3. Ascertain your income

Your total income for the tax year is what is referred to as your gross income. This includes all forms of income, including wages, salaries, tips, and revenue from side jobs. Add up your income for the tax year and gather all of your supporting papers. List all of your sources of income from contract work.

4. Remove Your Modifications

By deducting adjustments from your gross income, you can reduce your taxable income. They also pay your health insurance premiums, student loan interest, and IRA contributions if you work for yourself.

5. Choose Your Tax Savings

By taking some expenses out of your taxable income, you can reduce it. The two distinct types of tax deductions are standard and itemized. The standard deduction is an agreed-upon sum of money that is available to all tax filers. As itemized deductions, you are allowed to deduct some costs like state and local taxes, charity giving, and mortgage interest. It is better to select the tax deduction that would result in the greatest financial savings.

6. In Step Six, determine your taxable income.

After subtracting either your standard deduction or your itemized deduction from your AGI, your taxable income will be determined. According to federal law, this amount is your taxable income.

7. Choose Your Tax Credits

They are made up of education, earned income, and child tax credits. To reduce your tax obligation, find out which tax credits you are eligible for.

8. Find Out How Much Tax You Owe

Your overall tax liabilities, less any payments or credits, are referred to as your tax burden.

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9. Verify Your Upcoming Tax Payments

If you are self-employed, you must make estimated tax payments throughout the year. Check your expected tax payments throughout the year to ensure you made the required amount to avoid underpayment penalties.

10. Finishing Schedule C

Schedule C, the relevant form, is used to report your self-employment earnings and expenses. To calculate your self-employment tax, which is based on your net self-employment income, use Schedule C. In addition to this, you will also owe regular income tax.

11. Add Up Your Credits and Payments

Add all of your year-end payments, such as estimated tax payments and any taxes you have withheld from your pay. If you qualify, take a deduction for any tax credits. Here, your overall payments and credits will be displayed.

12. Figure out whether you owe a refund or are due one.

You should evaluate your entire tax burden in relation to your total payments and credits. If your tax due is greater than the sum of your payments and credits, you will be obliged to pay extra tax.

13.  Upload Your Return

When you’ve finished filling out Form 1040 and any necessary attachments, sign and date your return, and then send it to the relevant IRS address. Make sure to keep a copy of your return and any supporting documents for your keeping.

14. Tips on How to Cut Your Taxes as Much as Possible

Now that you know how, let’s speak about how to complete Form 1040 so that you may maximize your tax savings as a freelancer.

Using tax deductions is a smart move.

As a freelancer, you might be eligible to write off a range of expenses from your taxes, such as business travel, office supplies, and office equipment. Keep note of all your expenses throughout the year in order to maximize any relevant deductions.

Submit projected tax payments

As was previously stated, self-employed individuals are obligated to make projected tax payments throughout the year. This allows you to keep track of your tax obligations and prevent underpayment fines.

You May Want To Add

The ability to deduct more business expenses and a lower tax rate on self-employment income are just two of the additional tax benefits that incorporating your freelancing business may offer. Speak with a tax professional if you’re unsure if incorporation is the right option for you.

Employ tax-favored retirement accounts.

You may be able to reduce your taxable income and increase your tax savings by contributing to tax-advantaged retirement plans like an IRA or Solo 401(k). Use these accounts if you meet the requirements.


Although filling out a Form 1040 can be intimidating, with a little planning and assistance, it is actually rather easy. Even though you may face certain challenges as a freelancer when attempting to maximize your tax savings, there are a number of strategies you may employ to help minimize your tax burden. By taking advantage of tax deductions, paying expected taxes, considering incorporation, and using tax-advantaged retirement plans, you may keep more of your hard-earned money in your pocket.

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