Sell Your Life Insurance Policy in Hawaii | 2026 Life Settlement Guide

Life insurance is usually purchased for a clear reason. Protecting loved ones. Supporting a business obligation. Creating liquidity for estate planning that once mattered. Over time, circumstances change. Unfortunately, health status deterioration is common. The policy stays in force. Premiums continue. What once felt necessary can become inefficient or unnecessary.

If you own a life insurance policy in Hawaii that no longer fits your financial plan, you are not limited to surrendering it back to the insurance company for a modest cash surrender value or letting it lapse. Hawaii allows policyowners to sell qualifying life insurance policies to third parties for cash payout through the secondary market, commonly known as a life settlement.

These transactions are regulated by the state and designed to provide liquidity while setting clear rules around eligibility, disclosures, and consumer protections.

Is It Legal To Sell My Life Insurance Policy in Hawaii

Yes. Hawaii regulates life settlements under its insurance code and oversees these transactions through the Hawaii Insurance Division. Licensed life settlement providers may purchase policies, and licensed brokers may represent policyowners.

Hawaii is a regulated life settlement state. Any buyer or broker involved in the transaction must be properly licensed, and required disclosures must be provided to the policyowner.

Who Actually Buys Hawaii Policies

In a Hawaii life settlement, the buyer is a licensed life settlement provider. That provider becomes the owner and beneficiary of the policy, takes over premium payments, and ultimately receives the death benefit.

Behind these providers are institutional investors, life settlement funds, family offices, and other professional capital sources. When a licensed broker is involved, the broker represents you and markets the policy to multiple providers so offers can be compared.

Safety Concerns And The Hitman Question

Every once in a while someone asks the blunt question. If I sell my policy to a fund that gets paid when I die, does that put a target on my back?

It is a natural worry, but it does not line up with how this market actually works. For a deeper look at why this concern is unfounded, see our article on the "hitman" question.

Real buyers are regulated institutions. Think pension funds, asset managers, specialist life settlement funds, and family offices that live under compliance, audits and regulators. They buy large pools of policies, not one or two bets on a single person. Your policy is a tiny piece of a diversified portfolio. No one is sitting in a room watching your file and waiting for news.

More importantly, crime would completely destroy the investment. If someone were foolish enough to try something like that, the claim would be frozen, law enforcement would be involved, and the policy would become radioactive. The buyer would lose their capital, their license and their business, and the people involved would be looking at serious prison time. That is the exact opposite of what professional investors want.

There are plenty of real risks in life. Selling a policy through a regulated life settlement process does not meaningfully change your exposure to violent crime. The buyer wants a clean, boring actuarial outcome, not drama. If this were a real world problem you would see patterns of cases and headlines over the last few decades. You do not, because serious firms do not play games with that line.

If this worry is on your mind, it is better to treat it as something to acknowledge and then put aside, not as a deciding factor in whether to explore a settlement.

Retained Death Benefit And What Happens If The Buyer Stops Paying

In some transactions you do not sell the entire policy. Instead, you take part in cash today and keep a slice of the future death benefit. That structure is usually called a retained death benefit. The buyer agrees to carry the full premium load and, when the insured passes away, your family gets the retained portion without ever having to write another check.

The obvious follow up question is what happens if the fund or buyer stops paying premiums in ten years. If the policy lapses, your retained benefit disappears with it. That is a real risk, and it belongs in the contract, not swept under the rug.

Well structured deals handle this with clear protections. Common approaches include giving you the right to step in and assume the policy if premiums are not paid on time, or if the fund winds down or fails. In practice that can mean a clause that says if premiums are not funded by a certain date, ownership can revert or you can elect to take over and keep the policy in force by paying premiums yourself. Serious buyers also use professional servicing companies and advance notice requirements so you, your adviser, or your lawyer get notified long before coverage is at risk.

The point is that you do not have to simply hope the fund behaves. You can ask, in plain language, what happens if premiums are not paid, when you are notified, and what your rights are to step back in. If you are doing any kind of retained death benefit, those answers should be written into the settlement documents before you sign, so your family is not relying on a handshake twenty years from now.

How Much Is My Policy Worth In Hawaii

Hawaii does not regulate pricing. Value is determined by the market.

Buyers typically evaluate:

• Age of the insured
• Health (terminal illness will fetch more generally) and realistic life expectancy
• Policy type and issuing carrier
• Face value
• Premium structure and long-term cost

For policies that qualify, settlement offers are often meaningfully higher than surrender value but well below the full death benefit. Final pricing depends on underwriting results, premium efficiency, and buyer demand at the time the policy is marketed.

Holding Period In Hawaii

Hawaii imposes a two year holding period before a life insurance policy may generally be sold in a life settlement transaction.

In practical terms, a life settlement contract may not be entered into during the first two years after the policy is issued. This rule exists to prevent policies from being purchased with the intent to quickly resell them.

Hawaii law does allow limited, narrowly defined exceptions to this two year rule in specific situations, such as certain health or life changes that occur after policy issuance. These exceptions are not automatic and must be supported with documentation.

For normal planning purposes, most policyowners should treat Hawaii as a two year holding state.

Rescission Rights In Hawaii

Hawaii provides a clear rescission right after a life settlement contract is completed.

A policyowner has the right to terminate the transaction within fifteen calendar days after the life settlement contract is executed and the required disclosures are received. To rescind, the policyowner must return the settlement proceeds along with any premiums or loan interest paid by the provider during that period.

If the insured dies during the rescission window, the transaction is treated as rescinded, subject to repayment requirements. This rescission right must be disclosed in the settlement contract.

Escrow And How Funds Are Handled

Life settlement proceeds in Hawaii are handled through an independent escrow arrangement.

In practice:

• The buyer wires settlement funds into escrow

• Ownership and beneficiary changes are processed by the insurer

• After the carrier confirms the transfer, escrow releases funds to the seller

You should not be transferring ownership based on a promise of later payment. The funds are intended to be secured while the insurer completes the transfer.

Broker And Provider Licensing

Hawaii separates the buyer side from the seller side.

A life settlement provider is the buyer and must be licensed with the Hawaii Insurance Division.

A life settlement broker represents the policyowner and must also be licensed. Brokers are responsible for disclosures, marketing the policy, and presenting offers.

Licensing is how Hawaii enforces consumer protection in the life settlement market.

How The Process Works In Hawaii

A typical Hawaii life settlement follows this sequence:

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. Life settlement regulations vary by state, and this content should not be relied upon as a substitute for consultation with a licensed professional. Please consult with a qualified attorney, financial advisor, or licensed life settlement broker before making any decisions regarding the sale of a life insurance policy.