Life insurance isn't just about a death benefit anymore. It can be a powerful financial tool that plays a vital role in legacy planning, tax efficiency, and even cash flow. Whether you have a permanent life policy or term coverage, taking a fresh look at your insurance strategy could uncover valuable opportunities. Here are three smart strategies to consider that can help you get more value out of your coverage today.
1. Review Your Life insurance policy for performance and fit
Why it matters:
Many people buy life insurance and forget about it. But over
time, your needs change
and so does the performance of your policy. Policies can
underperform, become
outdated, or no longer align with your financial
goals—especially with shifts in interest
rates and the market.
What to do:
- Run in-force illustrations. This shows how
your policy is projected to perform
under current assumptions. Rising interest rates and changing dividend scales
have affected many permanent policies. - Check your beneficiaries. Life changes,
marriages, divorces, children, or
business transitions — may require updates. - Compare with new products. Modern life
insurance contracts can offer lower
costs, better guarantees, or improved long-term care riders. In some cases, a
1035 exchange to a new policy might make financial sense.
Pro tip: If it's been more than three years
since your last review, or if the policy was
purchased in a different economic environment, now is the time to
reassess.
Example: A 56-year-old executive purchased a universal life policy
in 2001. A 2025
review showed the policy would lapse early due to low interest
crediting. With her
advisor's help, she used a 1035 exchange to secure a new
indexed universal life (IUL)
policy with stronger performance — and named her grandson as
a secondary
beneficiary after a recent family update.
2. Use Life Insurance for Tax-Efficient Wealth Transfer
Why it matters:
With federal estate tax exemption limits set to potentially drop
in 2026, now is a crucial
time for proactive planning especially for high-net-worth
individuals and families.
What to do:
- Establish an Irrevocable Life Insurance Trust (ILIT) to remove
death benefit
proceeds from your taxable estate. - Consider funding life insurance as part of a wealth replacement
strategy when
gifting assets during your lifetime. - Business owners can also use life insurance for buy-sell
funding or key person
coverage, which may be an efficient way to guarantee funds are available to
transfer ownership or secure a new key employee.
Pro tip: A properly structured policy can pass
income tax-free and estate tax-free to
heirs but only with the right ownership and beneficiary
design.
Example: A Florida couple with a $20M net worth used annual
exclusions and part of
their lifetime gift exemption to fund a survivorship life policy
inside an ILIT. The policy's
tax-free death benefit will help their heirs pay future estate
taxes — preserving real
estate and investments earmarked for generational transfer.
3. Tap into Cash Value (Strategically)
Why it matters:
Permanent policies like whole life, indexed universal life and
variable universal life build
cash value and that cash can be a flexible source of liquidity,
especially in uncertain
markets.
What to do:
- Use policy loans to fund college expenses, real estate
purchases, or business
investments.
Design policies to function as a private banking system allowing you to access
capital while keeping it working for you. - For retirees, a tax-free supplemental income strategy using
policy withdrawals or
loans can be a powerful complement to taxable accounts.
Pro tip: Don't borrow blindly. Policy loans
reduce the death benefit and can create risk
if not managed correctly. But with guidance, they can be a smart
liquidity tool.
Example: A 63-year-old investor used the cash value from his whole
life insurance
policy to fund the down payment on a rental property in a
competitive market. By
accessing a policy loan, he avoided liquidating other assets and
was able to move
quickly on the purchase. The rental income helped him repay the
loan over time while
the policy's cash value continued to grow. His advisor
structured the loan to preserve
the death benefit and keep the policy in good standing.
Small Adjustments, Big Impact: Turn your life insurance into a
strategic
advantage
A smart life insurance strategy isn't just about protection
— it's about positioning.
Whether you're building wealth, planning for retirement, or
thinking about legacy, your
policies should be aligned with your broader financial goals.
Working with a knowledgeable, independent advisor allows you to
compare options
across multiple carriers and structure your coverage to work harder
for you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
