By J.R. Robinson, Financial Planner (May 2025)
Hawaii’s liability protection laws, particularly regarding minimum insurance requirements and asset protection, are relatively weak compared to many other states. This exposes residents-especially those with significant assets-to greater financial risk in the event of lawsuits or claims. Understanding these vulnerabilities and the available strategies for protection are essential for prudent financial planning.
Weaknesses in Hawaii’s Liability Protection
Hawaii mandates only minimal liability coverage for auto insurance: $20,000 per person and $40,000 per accident for bodily injury, and $10,000 per accident for property damage[1]. These limits are among the lowest in the country and can be quickly exhausted in the event of a serious accident or lawsuit. Medical costs, property damage, and legal judgments often exceed these amounts, leaving individuals personally responsible for any excess[1]. While higher coverage is available, many residents carry only the minimum required by law, leaving their personal assets exposed.
Asset Protection with Tenancy by the Entirety
One effective method for married couples in Hawaii to protect their assets is to hold property as tenants by the entirety. This form of ownership, available to married couples and reciprocal beneficiaries, offers significant protection from creditors. If only one spouse is subject to a lawsuit or debt, property held as tenants by the entirety is generally shielded from claims by that spouse’s individual creditors[2][3][4]. This protection extends to both real property (like a home) and, in Hawaii, to certain personal property such as bank accounts and securities[2].
Recent changes in Hawaii law have even extended these protections to property held in certain trusts, provided the correct legal language is used[3][4]. This means that couples can engage in estate planning and still retain robust asset protection.
The Importance of Strong Liability Insurance
Even with tenancy by the entirety, not all assets or situations are protected. For example, if both spouses are liable for a debt or judgment-such as in a jointly-caused accident-tenancy by the entirety does not shield the property[5]. Furthermore, unmarried individuals and those with assets not held in this manner remain vulnerable.
This makes carrying robust liability insurance, such as higher-limit auto policies and umbrella liability coverage, a crucial layer of defense. These policies can provide significant financial protection beyond the state minimums, covering legal costs, damages, and settlements that could otherwise threaten your home, savings, and investments[1].
Conclusion
Hawaii’s relatively weak liability protection laws mean that residents-especially those with substantial assets-should not rely solely on state minimums. Combining the asset protection benefits of tenancy by the entirety with comprehensive liability insurance offers a more secure approach, safeguarding both your property and your financial future from unforeseen legal threats[1][2][3][4].
John H. Robinson is the owner/founder of Financial Planning Hawaii and Fee-Only Planning Hawaii. He is also a co-founder of fintech software maker Nest Egg Guru and the new personal finance website NestEggPF.com.
End Notes
- https://www.thezebra.com/auto-insurance/hawaii-car-insurance/state-laws-hi/
- https://okuralaw.com/tenants-by-the-entirety-for-personal-property/
- https://est8planning.com/new-hawaii-law-gives-tenancy-by-the-entirety-protection-to-trusts/
- https://okuralaw.com/tenants-by-the-entirety-protection-available-in-trust-dec-2012/
- https://www.investopedia.com/terms/t/tenancy-by-the-entirety.asp
