In times of crisis, perspectives can shift in countless ways, often focusing more on things like life changes, family and money. That was certainly true during the COVID-19 pandemic, where, amid the biggest public-health crisis of our lifetimes, insurance suddenly came to the forefront of many people’s minds.

“We’ve absolutely seen a resurgence of people focusing on life insurance in recent years,” says Troy Randall, senior manager of Insurance and Annuities at RBC Wealth Management–U.S. “The pandemic caused people to refocus on so many important things like family, legacy and their estate.”

While that renewed focus has been a good thing, Randall says, insurance planning should be an important topic for people during ordinary times as well as the extraordinary.

According to data from the financial services trade group LIMRA, sales of individual life insurance policies jumped four percent in the fourth quarter of 2023, compared to the same period in 2022. Additionally, U.S. life insurance premiums set a record $15.7 billion in new sales in 2023.

“While those results are encouraging, the reality is that many people are still underinsured,” says Michelle Gilly, an insurance and annuity consultant at RBC Wealth Management–U.S.

Indeed, according to a 2024 LIMRA study, a record-high number of Americans (42 percent)—representing 102 million adults—say they need (or need more) life insurance.

“Life insurance can do so much more than cover funeral expenses,” Gilly says. “It can play a valuable role in protecting a family’s overall financial security.”

Here are four ways to effectively utilize life insurance in your wealth planning:

1. Tailor your insurance policy to your needs

Depending on the stage of life you’re in and your personal circumstances, there are several different kinds of life insurance coverage available, including:

• Term policies, which cover a set period—say, 20 years—and then expire at the end of that timespan, while charging relatively affordable premiums.
• “Whole life” policies are a form of permanent insurance, which have set premiums (typically at a higher level than term), are tied to a fixed interest rate, and accumulate cash value at a predetermined rate on a tax-deferred basis. That cash value can be borrowed against if need be.
• “Universal life” policies are another form of permanent coverage, with the cash value tied to rates that are managed and declared by the insurance company. As with whole life policies, the cash value can be borrowed against or withdrawn. These policies tend to offer more flexibility, allowing policyholders to adjust their premiums and death benefits as needed.
• “Variable universal life” products, meanwhile, allow the owner to choose how their cash value is invested to potentially produce greater returns (but also potentially greater losses). The death benefit and premiums are adjustable, as well.

Protection needs evolve over time, so it’s wise to revisit your plan as your situation changes. If your term period is up, consider converting your term coverage into a permanent plan of insurance. Or, if you’re thinking of canceling your permanent insurance coverage, consider repurposing it, where the cash value would be transferred into a new policy with a different type of coverage.

“Sometimes when people reach their 70s or 80s, they think they don’t need coverage anymore and just cancel their policy,” Gilly says. “But there are options to repurpose it, such as into a policy that provides them with long-term care coverage.”

2. Don’t limit yourself to workplace insurance

Many people (65 percent of employed Americans, according to LIMRA) secure life insurance through employer plans and then consider the matter settled. Instead, that workplace policy should be considered just one part of a larger strategy, Randall explains.

That’s because the median coverage in such workplace plans tends to be either a flat sum of $20,000 or one year’s salary, LIMRA says. Is that enough to safeguard your family in the event of your passing? Likely not.

It’s also not typically portable, so if you move on from your current job or become unemployed, your workplace coverage comes to an end. That’s why having an individual policy outside of work, in addition to any employer offering, can be a wise strategy for your family’s future.

“For most people, having both is a really good idea,” Randall says. “Take advantage of any group term insurance your company may provide as an employee benefit—often at no cost up to a certain amount of coverage. And then if you also purchase some life insurance outside of your employer, you won’t have to worry about coverage if you switch jobs or your health situation changes.”

3. Remember the tax benefits

For high-net-worth families, life insurance can be a critical tool when it comes to the tax burden for heirs. If the value of your estate exceeds state and federal exclusions—currently $13.61 million at the federal level—then the next generation could face costly estate taxes. Those fees could force them into selling assets to cover the bill.

Life insurance death benefits, on the other hand, could help them cover such taxes and avoid having to liquidate assets.

“Oftentimes people utilize life insurance for estate-planning purposes to make the estate whole and provide liquidity to pay estate taxes when they pass away,” Gilly says. “Estate taxes can cut away at the amount children would inherit, so it’s not uncommon for high-net-worth families to have an irrevocable insurance trust that owns policies on an individual or a couple.”

4. Use life insurance as part of your charitable giving

It’s not just your heirs who could benefit from a comprehensive life insurance strategy; it’s also a way to leave a legacy with the philanthropic causes that are most important to you.

There are a few different ways to do that. One is setting up a charitable giving rider, which will pay a percentage of the policy’s value to a charity of your choice. Another is a policy donation, where you transfer ownership to the charity, and the organization can then either eventually receive the benefits or surrender it for the cash value. If your permanent policy sends you dividends every year, you can direct those to charity. Or you can simply name a charity as a policy beneficiary.

“It’s a great way to leverage your dollars for charitable giving,” Randall says. “In terms of having $100,000 to give to charity, for example, if you donate it right now, that money is gone. But if you put that money toward buying life insurance [via a single premium, lump-sum payment], that sum could potentially turn into $300,000 or $400,000 in benefits, and you could be leaving behind much more.”

Whatever route you choose for a life insurance strategy, timing is key. Due to age and any health issues, securing life insurance at a younger age can make it more affordable and more impactful.

“That’s true legacy,” Randall says.