First, Create AMI from instance you wish to build template version from and copy its ID to clipboard

Then...

EC2 -> Instances -> Launch Templates

Click template you wish to update

Actions (upper right) -> Modify template (Create new version)

Set Template Version Description eg "CMS-Webserve-Feb-27-2020"

Select source template (eg whatever is currently "default")

Specify AMI (paste ID from clipboard)

Click Create

Go back into EC2 -> Instances -> Launch Templates

Click "Versions" tab

Click latest version number -> Actions -> Set Default

IMPORTANT: ALWAYS TEST!!! Go to Auto Scaling groups and demote/scale in a new instance to an unsubstantial group.
Make sure EVERYTHING works as expected!

Done!