The national guide explains the main policy types:

• term: level, decreasing and renewable or convertible;
• whole life and universal life;
• variable and variable universal life;
• endowments;
• joint life and survivorship life.

Hawaii's state questions on policy types focus on three areas of the Code: variable contracts (HRS 431:10D-118), group life eligibility (HRS 431:10D-201 ff.), and credit life (HRS Article 431:10B).

National concepts in brief

• Term covers a set period with no cash value. Decreasing term follows a falling debt, such as a mortgage.
• Whole life gives lifetime protection with guaranteed cash value.
• Universal life has flexible premiums and an adjustable death benefit.
• Variable policies put cash value in separate account subaccounts, so the owner bears the investment risk.
• First-to-die joint life pays at the first death. Survivorship (second-to-die) pays at the second death and is a common estate-planning tool.

Variable contracts

• Who regulates: the insurance commissioner has sole and exclusive authority over the issuance and sale of variable contracts and the licensing of the people who sell them (HRS 431:10D-118(d)).
• License: selling variable life or variable annuities requires the variable life and variable annuity products line of authority (HRS 431:9A-103(c)).
• Contract wording: the contract must say the dollar amount will vary with investment experience. Its first page must state that benefits are on a variable basis (HRS 431:10D-118(b)).
• Separate accounts: income, gains and losses on separate account assets are credited to or charged against that account only, apart from the insurer's other results.
• Death benefit: a variable annuity may pay a death benefit during the deferral period of up to the greater of premiums paid or the contract value at death.

Group life eligibility

Employee groups (HRS 431:10D-202):

• Amounts of insurance must follow a plan that prevents individual selection.
• A noncontributory policy (the employer pays everything) must insure all eligible employees except those who reject coverage in writing.

Association groups (HRS 431:10D-210):

• The association must have been formed for purposes other than getting insurance.
• At least 75% of eligible members must enroll.
• At least 25 people must be covered when the policy is issued.

Dependents (HRS 431:10D-212):

• Spouses and dependent children may be covered in amounts equal to the member's own coverage.
• A dependent child is a child under 18, under 23 if in school and relying on the insured, or any age if unable to support themselves because of disability.

Group life provisions such as conversion, the grace period and incontestability are in the Life Policy Provisions guide.

Credit life and credit disability (Article 431:10B)

• Scope: the article does not apply to loans of more than ten years or to isolated transactions (HRS 431:10B-102).
• Form: credit life may be issued only as term coverage. It can be an individual policy to the debtor or a group policy to the creditor (HRS 431:10B-104).
• Amount: generally no more than the total amount repayable on the debt (HRS 431:10B-105).
• Term: starts when the debtor becomes obligated and may not run more than 15 days past the debt's scheduled maturity, unless extended at no extra cost (HRS 431:10B-106).
• Choice of insurer: a creditor that requires credit life must tell the debtor in writing that they may use existing coverage or any authorized insurer (HRS 431:10B-112).
• Claims: only the insurer or its claims representative may settle claims, and the creditor may not serve as the claims representative (HRS 431:10B-111).
• Lender coercion rule: Hawaii's general ban on lenders requiring a particular insurer or producer does not apply to credit life and credit disability (HRS 431:13-104(f)).

Insurable interest and consent

• Anyone buying insurance on another person's life for their own benefit must have an insurable interest when the contract is made (HRS 431:10-204).
• Arrangements where strangers with no insurable interest buy coverage to profit from a death fail that test.
• A married person may insure a spouse without the spouse's consent (HRS 431:10-234).

Common exam traps

• Variable products need the variable line of authority, and the commissioner has exclusive authority over them.
• Association group life requires 75% enrollment and 25 lives, from an association formed for a purpose other than insurance.
• Dependent children qualify up to 18, or up to 23 if they are students.
• Credit life is term only, may not exceed the debt, and may run at most 15 days past maturity.
• The creditor may not act as the claims representative.