Life insurance isn’t just a safety net for your loved ones—it’s also a flexible financial tool that can help you reach your personal, business, and legacy goals. Whether you own a term or permanent policy, there are many creative and strategic ways to put your coverage to work.
Here are 20 ways to make the most of your life insurance policy…
1. Use Term Life Insurance for a Loan
Need a personal or small business loan? Some lenders require life insurance as collateral. A short-term life policy—such as a one- or five-year renewable term—can protect your lender and your loved ones while your loan is active.
2. Borrow Against Your Cash Value
Permanent life insurance builds cash value over time. Once it’s grown, you can borrow against it to cover emergencies, home repairs, or other expenses. Just remember: unpaid loans (even if they’re against yourself) and interest reduce your policy’s death benefit.
3. Manage Chronic Illness with Living Benefits
Many modern permanent policies include living benefits, which allow you to access part of your death benefit if you develop a chronic or critical illness. Those funds can help with treatment costs or other health-related needs, such as paying the bills while you’re receiving chemotherapy or recovering in the hospital.
If you’d like to learn more about the different types of health insurance and how they can protect you from debt if you get sick, check out our other article: ‘10 Essential Health Insurance Plans That Protect You From Unexpected Medical Costs.’
4. Build a Tax-Advantaged Savings Tool
Because the cash value of permanent life insurance grows tax-deferred, it can complement your other investments. Some policies even guarantee a minimum rate of return, offering stability when the market fluctuates.
5. Cover or Offset Estate Taxes
Permanent policies can reduce or cover estate taxes. Premiums may lower your taxable estate, and death benefits provide immediate, tax-free liquidity for your beneficiaries.
6. Increase Your Death Benefit
If you decide not to withdraw or borrow your accumulated cash value, you may be able to use it to increase your death benefit—leaving more for your loved ones after you pass away. Ask your insurer about conversion or enhancement options.
7. Pay Premiums with Your Cash Value
Once your permanent policy has built up enough cash value, you might be able to use that balance to cover future premiums—giving you more flexibility and cash flow today.
8. Surrender Your Policy for Its Cash Value
If your needs or finances change, you can surrender your permanent policy and receive its accumulated cash value. However, surrendering usually ends your coverage and may have tax implications, so talk to your financial professional first.
9. Supplement Your Retirement Income
After you’ve maxed out contributions to traditional retirement accounts, your policy’s cash value can provide an additional stream of tax-advantaged income in retirement.
10. Consider an Annuity for Lifetime Income
An annuity is another form of life insurance that can provide a predictable income during retirement. You can choose a fixed annuity (guaranteed payments) or a variable one (payments that fluctuate with the market).
11. Protect Your Estate with an Irrevocable Life Insurance Trust (ILIT)
An ILIT can keep life insurance proceeds outside of your taxable estate and protect your beneficiaries from creditors. Because these trusts are complex and permanent once established, it’s best to consult an estate attorney before setting one up.
12. Use Cash Value for Education or Debt
Need help with tuition or paying down high-interest debt? You may be able to borrow from your policy’s cash value. Just be aware that withdrawals may reduce your death benefit and could trigger taxes.
13. Convert a Policy to Pay for Long-Term Care
If you’re planning for Medicaid eligibility, you can sometimes convert a life insurance policy into a long-term care benefit plan instead of surrendering it. A benefits administrator then handles payments directly to care providers while maintaining some value for you.
14. Fund a Business with Your Cash Value
Starting a new business? Policy loans can provide seed capital—no credit check required. It’s a flexible way to access funding while keeping your other assets intact.
15. Use Your Policy as a Low-Risk Investment Alternative
If you prefer conservative investments, a permanent life insurance policy’s guaranteed minimum growth can offer stable, tax-deferred returns—even during market downturns.
16. Donate Your Policy to Charity
You can name your favorite nonprofit or charity as a beneficiary—or transfer ownership of your policy altogether. Either way, your contribution becomes a generous, tax-free gift that lives on beyond you.
17. Protect Your Business with “Key Person” Insurance
If your company relies heavily on certain employees or executives, key person life insurance can help offset financial losses if they pass away unexpectedly. It’s a crucial safeguard for business continuity.
18. Retain Employees with Deferred Compensation Plans
Businesses can use Group Cash Value Life Insurance as part of a non-qualified deferred compensation plan. This allows employees to build tax-deferred cash value, borrow against it, and name their own beneficiaries—all while incentivizing long-term loyalty.
19. Create a Buy-Sell Agreement
Business partners can use permanent life insurance to fund a buy-sell agreement, ensuring the surviving partner(s) can purchase the deceased partner’s share of the business. Always consult a business attorney or adviser to structure this properly.
20. Offer Group Life Insurance Benefits
Group life insurance plans can be a valuable employee benefit—especially for workers who might not qualify for affordable individual coverage. Employers can often add supplemental coverage options at a low cost.
Final Thoughts
Your life insurance policy is more versatile than you might think. From building wealth and protecting your family to growing your business and supporting your community, it can serve as a cornerstone of your financial strategy.
Life Insurance Questions?
We hope this post on the different ways you can use a life insurance policy has been helpful.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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This article was updated on October 22, 2025.