HI Life & Health cheat sheet

Hawaii's Insurance Code is codified in Hawaii Revised Statutes (HRS) Chapter 431 and is administered by the Insurance Division of the Department of Commerce and Consumer Affairs (DCCA).

The Insurance Commissioner heads the Insurance Division and holds authority to license producers and insurers, examine insurer operations, investigate complaints, and impose fines or license suspensions.

Producer licensing requires passing the state licensing exam for the line applied for, filing an application, submitting fingerprints for a criminal background check, and being appointed by an authorized insurer.

Hawaii resident producers must complete 24 credit hours of approved continuing education per two-year license term, including a required ethics component.

Hawaii's Prepaid Health Care Act requires employers with 20 or more employees to provide health coverage to employees who work at least 20 hours per week.

Unfair trade practices, including misrepresentation, twisting, rebating, and illegal inducements, are defined in HRS Chapter 431:13 and can result in fines, restitution, or license revocation.

Premiums collected by a producer are held in a fiduciary capacity and must be accounted for and remitted promptly; commingling premium funds with personal funds is prohibited.

Only authorized (licensed) insurers may transact insurance in Hawaii; transacting with unauthorized insurers is unlawful except for limited placements through surplus lines brokers.

A producer license must be renewed before its expiration date; operating on a lapsed license is unlicensed activity even if renewal is later completed.

Risk is uncertainty about loss; insurance handles pure risk (chance of loss only) and does not insure speculative risk (chance of loss or gain).

A peril is the cause of a loss (fire, accident, death); a hazard is a condition that increases the chance or severity of loss and may be physical, moral, or morale.

Insurable interest in life insurance must exist at policy issue; in property insurance it must exist at the time of loss.

The principle of indemnity restores the insured to the pre-loss financial position and applies to property and health insurance, not to life insurance, which is a valued contract.

A valid insurance contract requires offer and acceptance, consideration, competent parties, and a legal purpose; insurance is also a contract of adhesion, aleatory, unilateral, and one of utmost good faith.

A representation is a statement believed to be true, while a warranty is a statement guaranteed true; a material misrepresentation or concealment can void coverage.

Waiver is the voluntary giving up of a known right; estoppel prevents a party from asserting a right after the other party reasonably relied on its earlier conduct.

The law of large numbers holds that predicted losses become more reliable as the number of similar exposure units increases; adverse selection is the tendency of higher-risk applicants to seek coverage.

Subrogation lets an insurer that paid a loss pursue the responsible third party, and reinsurance is insurance purchased by an insurer to transfer part of its risk to a reinsurer.

Human life value estimates the present value of the insured's future earnings available to dependents; the DIME method adds Debt, Income, Mortgage, and Education needs.

Personal uses include income replacement, estate creation and liquidity, debt and mortgage protection, and education funding; business uses include key person, buy-sell funding, split dollar, deferred compensation, and executive bonus.

Insurable interest must exist when the application is signed; a person may insure self, spouse, business partners, or a key employee whose death would cause financial loss.

Underwriting sources include the application (Part I general information, Part II medical history), medical examinations, attending physician statements, the MIB, prescription databases, and inspection reports.

Risk classifications are preferred, standard, substandard (table rated), and declined; each substandard table typically adds 25% to standard mortality (Table 2 = 50% extra).

HIPAA and the Fair Credit Reporting Act give applicants privacy rights, including notice of information practices, access to consumer reports, and the reason for adverse underwriting action.

A conditional receipt provides coverage from the date of the application or the completed medical exam, whichever is later, if the applicant proves insurable under the insurer's underwriting rules.

Death benefits paid to a named beneficiary are generally free of income tax; interest paid on proceeds is taxable, and cash value growth is tax deferred.

A modified endowment contract (MEC) is a life policy that fails the seven-pay test; loans and withdrawals are taxed last-in first-out and may incur a 10% penalty before age 59½.

Term insurance provides pure death protection with no cash value and is issued as level, decreasing, increasing, or annually renewable (ART) coverage.

Renewable term may be renewed without evidence of insurability to a stated age; convertible term may be exchanged for permanent coverage without evidence of insurability, at original or attained age rates depending on the policy.

Whole life endows at age 100 (or 121 in newer policies) and features a guaranteed level premium, guaranteed cash value, and tax-deferred growth of that cash value.

Limited-pay whole life (for example 20-pay or paid-up at 65) compresses premiums into fewer years; single-premium whole life is fully paid at issue and is automatically a modified endowment contract.

Universal life is flexible-premium, adjustable-benefit permanent coverage; mortality charges are deducted monthly. Option A provides a level death benefit, Option B a death benefit equal to face amount plus cash value.

Variable life and variable universal life invest cash value in separate-account subaccounts; the owner bears the investment risk, and these products are securities requiring both insurance and securities licenses.

Indexed universal life credits interest based on an external index, limited by a cap and participation rate, with a guaranteed floor (often 0%) protecting against index losses.

Survivorship (second-to-die) life pays on the death of the last of two insureds and is commonly used to fund estate settlement costs.

Group life is annually renewable term issued under a master contract; participants receive certificates, and conversion to individual coverage is typically available when group coverage ends.

The entire contract provision states that the policy, the attached application, and any riders constitute the whole agreement, and no outside document may alter it.

After two years from issue, the incontestability clause bars the insurer from contesting the policy for misstatement, but misstatements of age or sex are corrected by adjusting the benefit rather than voiding coverage.

Standard life policy timing: grace period of 30 or 31 days, suicide exclusion of about two years, free-look period of 10 days (longer for replacements and annuities).

Reinstatement is generally available within 3 years (some policies allow 5) of lapse upon evidence of insurability plus payment of overdue premiums with interest; a new contestable period then applies.

Nonforfeiture options for a lapsed cash-value policy are cash surrender, reduced paid-up insurance, and extended term insurance.

Dividend options include cash, reduction of premium, accumulation at interest, paid-up additions, and one-year term insurance.

Settlement options include lump sum, interest only, fixed period, fixed amount, life income (straight life, life with period certain, refund life), and joint and survivor.

Common riders are waiver of premium, disability income, guaranteed insurability, accidental death and dismemberment, child term, accelerated death benefit, long-term care, and return of premium.

Policy loans accrue interest and reduce the death benefit if unpaid; nonpayment of a loan does not lapse a whole life policy while cash value exists, but can lapse a universal life policy.

An annuity liquidates a sum of money over time and transfers the risk of outliving one's income (longevity risk) to the insurer, which guarantees payments for life.

An immediate annuity is bought with a single premium and begins payments within one payment period; a deferred annuity accumulates value before any payout begins.

During the accumulation phase the contract builds value; annuitization converts that value into income, and the payment amount depends on age, payout option, interest assumption, and sex where permitted.

Fixed annuities guarantee a minimum interest rate, indexed annuities credit an index subject to cap and floor, and variable annuities invest in subaccounts where the owner bears investment risk.

Payout options include straight life, life with period certain, installment refund, and joint and survivor; a straight life payout produces the largest periodic income.

The exclusion ratio equals the investment in the contract divided by the expected return, and it determines the tax-free portion of each annuity payment.

Nonqualified annuities grow tax deferred; withdrawals are taxed income first, a 10% penalty generally applies before age 59½, and Section 1035 allows tax-free exchanges of life or annuity contracts.

Surrender charges are declining percentages levied on withdrawals above the free-withdrawal amount (often 10% per year) during the surrender charge period.

Accumulation units measure value during the accumulation phase of a variable annuity, while annuity units measure the value of each income payment during the payout phase.

Health insurance cost-sharing elements are the deductible, coinsurance or copay, out-of-pocket maximum, and any benefit maximum; the insurer pays covered expenses above these amounts.

HMO members use network providers and a primary care gatekeeper; PPO members may use in- or out-of-network providers with lower cost sharing in network; POS plans blend both; EPOs exclude out-of-network care except emergencies.

Group health underwriting evaluates the group as a whole (size, industry, participation level, prior claims experience), while individual underwriting evaluates each applicant's health history.

COBRA requires employers with 20 or more employees to offer continued group coverage after a qualifying event for up to 18 months (29 for disability extension, 36 for dependents), at full premium plus 2%.

HIPAA guarantees group health portability, limits preexisting-condition exclusion periods to 12 months with credit for prior creditable coverage, and requires guaranteed availability and renewability.

Medicare Part A covers hospital care, Part B covers medical services, Part C is Medicare Advantage, and Part D covers prescription drugs; Medicaid is a joint state-federal assistance program.

A health savings account requires a qualifying high-deductible health plan; contributions are pre-tax, unused funds roll over, and withdrawals for qualified medical expenses are tax-free.

Disability income insurance replaces roughly 60-70% of income and is defined by the elimination period, benefit period, and own-occupation versus any-occupation definition of disability.

Hawaii's Prepaid Health Care Act mandates employer-sponsored hospital and medical coverage for employees working at least 20 hours per week at employers with 20 or more employees.

Uniform required provisions set grace periods of 7 days for weekly premiums, 10 days for monthly, and 31 days for other modes; the policy stays in force during grace and the premium is a debt.

Claim timing rules: notice of claim within 20 days of loss, claim forms furnished by the insurer within 15 days, and written proof of loss within 90 days (or as soon as reasonably possible).

Legal actions may not be brought sooner than 60 days after written proof of loss, nor later than 3 years after the required proof-of-loss filing date.

The incontestability period for health coverage is two years; misstatement of age adjusts benefits to what the premium would have purchased at the correct age.

A preexisting-condition provision limits coverage for conditions diagnosed or treated during a look-back period before the effective date, for a stated exclusion period unless creditable coverage applies.

Reinstatement restores a lapsed health policy, typically with a new preexisting-condition period and a new contestable period; accident coverage may resume immediately.

Coordination of benefits rules determine which plan pays first when the insured is covered twice, preventing total payment above 100% of covered expenses; the birthday rule applies to dependent children.

Renewability categories run from cancellable and conditionally renewable to guaranteed renewable and noncancellable, in which the insurer may not cancel or raise premiums on the individual.

Group conversion and continuation rights allow a departing insured or dependent to convert to an individual policy or extend benefits while totally disabled.