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How Life Insurance Works in Hawaii
Types of Life Insurance in Hawaii
Term Life Insurance
Permanent Life Insurance
Hawaii Life Insurance Laws
The Cost
Hawaii Life Insurance Resources
FAQs
EZ Can Help!
How Life Insurance Works in Hawaii
When you buy life insurance, you are entering into a legally binding contract with your chosen insurance company. You agree to pay the required premiums to your insurer, and in return, they will pay your loved ones a lump-sum payout, or death benefit, if you die while your insurance policy is still in effect. They will be able to use this death benefit for anything they wish, including mortgage payments, retirement or college savings, paying down debts, final expenses, or simply to replace your income.
If you have dependents, debts, or other financial obligations that will have to be met even after your death, you should seriously consider purchasing life insurance. This is especially true if you are the primary or sole provider for your family. Having a policy will mean that if you die unexpectedly, your loved ones will be able to maintain their current standard of living.
Types of Life Insurance in Hawaii
Because there are so many distinct types of life insurance policies available on the market today, it is possible for almost anyone to find one that is suitable for them. But that means there will be a lot of decisions to make – and the first one will be between the two main types of life insurance:
- Term life insurance
- Permanent life insurance
When deciding whether to purchase term or permanent life insurance, it is important to take into account when in the future you foresee yourself needing the protection provided by the policy, as well as how much you’re willing to pay for the policy.
Term Life Insurance
Term life insurance has become the most popular type of life insurance because of its lower premiums. Premiums for term life are cheaper than for permanent life because these policies will not cover you indefinitely. Instead, when you purchase term life insurance, you specify how long you want to be covered for. The term of a policy is typically 15 years. But policies can be bought for as little as one year or up to 30 years. The amount of your monthly premium will not change for the duration of your policy. If you die while the policy is still in effect, your beneficiaries will receive a tax-free death benefit.
There are several types of term life policies available, including:
Level Term Life Insurance
Both the death benefit and your premium price will be locked in at the time you purchase a level term policy. And will not change for the duration of the policy. This type of policy is the most popular type of term life insurance policy.
Annual Renewable Term Life Insurance
Annual renewable life insurance is a one-year term life insurance policy. You can renew your policy on an annual basis, but the premiums will rise with each passing year.
Increasing Term Life Insurance
Over the course of the coverage period, the death benefit amount of an increasing term life insurance policy will gradually increase. For example, your benefit amount might increase by 5% each year. There is a chance that the cost of the premiums for this type of policy will change over the life of the policy.
Decreasing Term Life Insurance
The death benefit that is associated with decreasing term life insurance gradually decreases over the course of the policy’s term. While the premiums remain constant. This type of policy is usually purchased for coverage while you repay a loan or mortgage. As the loan is repaid, the value of the death benefit will decrease.
Return-of-Premium Life Insurance
Return-of-premium (ROP) insurance is a form of term life insurance that reimburses your premiums if you don’t die prior to the expiration date of the policy. Many individuals find the return of premiums feature included with this policy to be appealing. But you should be aware that the cost of ROP policies is significantly higher than that of other term life policies.
Permanent Life Insurance
Unlike a term life policy, your permanent life insurance policy will remain in effect for the rest of your life. As long as you continue to pay your premiums. For this reason, and because permanent life policies usually have a savings account known as cash value attached to them, premiums are usually higher for these policies than for term policies.
There are numerous types of permanent life insurance policies to choose from, including:
Whole Life Insurance
Whole life insurance not only provides a benefit to beneficiaries upon death, but it also includes a savings component. Which means that when you pay your premiums, you will accumulate a cash value. Throughout the term of the investment with these policies, interest will be accrued on a tax-deferred basis at a predetermined rate.
Universal Life Insurance
This type of policy is known for its flexibility. Because you can change the amount of the death benefit as well as the amount of your premium payments throughout the life of the policy. These policies include a cash value component. Once your cash value has accumulated enough; you will be able to use it to pay your premiums. In addition, you will be able to lower your premiums by lowering the amount of your death benefit, if you wish.
Indexed Universal Life Insurance
Indexed universal life (IUL) insurance is another type of permanent life insurance that includes a cash value. This cash value can grow based on investment in a stock index, or a predetermined grouping of various stocks. The premium for an IUL can be adjusted in the same way that the premium for a universal life policy can. It rises and falls in tandem with the cash value of the policy. Eventually, it’s possible that you wouldn’t have to pay a premium because the cash value would cover it all.
Variable Universal Life Insurance
The cash value of a variable universal life (VUL) policy, like the cash value of other permanent life insurance policies, can be invested. But the cash value account includes investment subaccounts that are similar to mutual funds. The premium of these policies, like those of traditional universal life insurance, can be changed.
Final Expense Life Insurance
A final expense life insurance policy is a type of whole life insurance that pays out a modest benefit upon the policyholder’s passing. Usually between $2,000 and $35,000. The death benefit from final expense insurance is meant to cover final expenses. Such as a burial, cremation, or funeral service after the insured person has passed away. With that being said, if you have one of these policies, your beneficiary will be free to spend the money from the death benefit however they see fit. Such as on a trip or the payment of their taxes.
These policies can be expensive, and don’t pay out very much, as noted above, but they can be a good option for those who are older and in poor health who might have trouble getting a more traditional policy. That’s because these policies do not require a medical exam, and usually go into effect immediately.
Hawaii Life Insurance Laws
When it comes to life insurance, the federal government generally leaves consumer protection and insurance industry regulation up to the individual states.
That means life insurance policies and insurers in Hawaii are subject to consumer protection laws. Insurance in Hawaii is primarily governed by Chapters 431–435 of Title 24 of the Hawaii Revised Statutes. Though other provisions have been enacted as consumer protection laws. Hawaii’s insurance industry is regulated by the Insurance Division of the Department of Commerce and Consumer Affairs.
You’ll have the following rights in Hawaii when you purchase life insurance:
Free Look Period
In Hawaii, life insurance customers are afforded a “free look” period of at least ten days. That means, if you purchase a policy and then decide you don’t want it, you have ten days from the date of receipt to cancel the policy and receive a full refund of any premiums paid for it. It is against the law for a company to charge a customer anything during this “test drive” period. So, you will have time to carefully consider your insurance policy.
Grace Period
Life insurance companies in Hawaii are also required to give you a 30-day grace period if you are late making a premium payment. That means you have 30 days to make up for your late payment before your policy is terminated. If you do not pay your premium by the time the 30 days are up, your policy will be terminated.
Benefit Guarantee
There are safeguards in place in the unlikely event that your life insurance company goes out of business. The Hawaii Life and Disability Insurance Guaranty Association will pay out your death benefit claim, up to $300,000. And your cash value is guaranteed for up to $100,000. Be aware, though, that you will only be reimbursed up to this amount. No matter the value of your coverage or cash value, or how many policies you own.
Settlement Timelines
Although the state of Hawaii does not specify a particular amount of time that insurance companies have to settle claims, the state does mandate that all claims be paid in a prompt manner. Beginning on the date of death, insurance companies are required to pay interest for every day that they have not paid out the death benefit. This requirement is put in place to encourage prompt payment of claims by insurance companies. And ensures that the vast majority of claims are paid within approximately one month.
The Cost
There are a number of variables that can impact the price of your premiums. Including your age, current health, and even your gender. Get in touch with one of our EZ agents to receive the quickest and most accurate information regarding your potential costs. Simply provide them with some information, and they will be able to find you free personalized quotes. But, to give you an example of prices, a 31-year-old man in good health and who does not smoke could pay anywhere from $19 to $64 per month for a 20-year $1,009,000 policy.
Hawaii Life Insurance Resources
In Hawaii there are several state and federal resources in place to help you if you have any problems with your insurer or policy. These resources include:
- Hawaii Insurance Division – The Hawaii Insurance Division is the place to go for answers to most insurance-related questions and concerns. This government organization provides several valuable services to the general public as the regulator of insurance transactions on a statewide scale. They provide services like investigating claims of insurance fraud and informing clients about life insurance choices.
- Hawaii Life & Disability Insurance Guaranty Association – The Hawaii Life & Disability Insurance Guaranty Association protects policyholders and beneficiaries in the event of the insolvency of a licensed Hawaiian insurance company. The association must provide coverage for lost benefits associated with life insurance and annuity policies (both individual and group). Up to the maximum allowed by law.
FAQs
Does Hawaii require life insurance?
No, there are no state or federal laws requiring life insurance.
What are the best life insurance companies in Hawaii?
There are a lot of good ways to get life insurance in Hawaii. At the top of the list are Bannerlife, MassMutual, PacificLife, Prudential, and Lincoln Financial.
How much does life insurance cost in Hawaii?
There are many things that can affect how much life insurance costs, but here’s an example. A healthy 31-year-old woman in Hawaii who buys a $1,009,000 20-year term policy will pay an average of $39.89 per month. A healthy 31-year-old man, on the other hand, will pay about $34.73 for the same policy.
EZ Can Help!
At EZ, we know that everyone has unique requirements, priorities, and financial constraints. We also understand that you want the best financial security for yourself and your family without depleting your savings account. So, we make every effort to simplify the process of purchasing life insurance, and pledge to always offer every one of our services at absolutely no cost to you. You will not be charged any additional fees for assistance with anything. From answering basic questions to navigating policy selection to the enrollment process and beyond. Simply enter your zip code in the space provided below or call us at 877-670-3560 to get started.
