C. 2 years is correct. Hawaiʻi law contains an important restriction intended to combat stranger-originated life insurance and similar arrangements . HRS §431C-33 generally prohibits a person from entering into a life settlement contract at the time of application or issuance of a life insurance policy or during the two-year period commencing with the policy's date of issuance , unless a statutory exception applies.

The restriction helps distinguish a legitimate later decision by a policyowner to sell existing coverage from a policy originally obtained primarily for immediate transfer to an outside investor. Life insurance is intended to protect legitimate insurable interests, not to operate simply as a wagering instrument on an individual's life.

Hawaiʻi recognizes defined exceptions to the two-year prohibition. For example, qualifying converted coverage may satisfy the requirement when the conversion policy and prior continuous coverage together equal at least two years. Other statutory circumstances can also permit an earlier settlement when the required conditions and certifications are met.

A producer should therefore avoid treating the two-year restriction as absolute in every factual situation, but it is the controlling general rule .

Six months and one year are insufficient, while five years exceeds the statutory prohibition period.

Reference topics: HRS §431C-33(m); Life Settlements; Stranger-Originated Life Insurance; Two-Year Restriction.

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