South Dakota Life Insurance Only (Outline: South Dakota Specific II, 8 items)

Outline headings covered: II.A Marketing practices (advertising; illustrations; insurable interest; military sales); II.B Policy replacement (purpose; definitions; exemptions; duties of the producer; duties of the replacing insurance company); II.C Individual life and annuity (free look; grace period; policy loans; assignment); II.D Group life (group underwriting requirements; conversion to an individual policy; dependent coverage; assignment); II.E Annuities (suitability and best interest; consumer protection; regulation of variable products). Printed weight: 8 of the 30 scored South Dakota Specific items. This chapter teaches from the text of South Dakota Codified Laws Title 58 (3,405 sections, current to September 3, 2026) and Administrative Rules of South Dakota Article 20:06 (Division of Insurance).

Chapter 4 teaches the mechanics of free look, grace, loans and assignment with the South Dakota numbers. This chapter follows the outline order and adds the sales-practice rules.

7.1 Advertising and Sales Practices (Outline: II.A.1.a)

Who and what. The South Dakota advertising rule covers any health or life insurance advertisement or solicitation made in the state by or for an insurer, agent, broker or solicitor. The insurer is responsible for every advertisement, whoever writes it, and must keep a system of control over content and distribution (ARSD 20:06:10:02). "Advertisement" includes printed and audiovisual material, sales aids, internet communications, lead-generating devices, prepared sales talks, and material delivered with a policy to solicit renewals or reinstatements (SDCL 58-33A-3). Advertising must be truthful and not materially misleading in fact or by implication (SDCL 58-33A-10).

Rules a producer must know (ARSD 20:06:10):

• Appropriate recommendation. The agent must determine at the time of sale that placement is not inappropriate, considering the consumer's finances, need for insurance, and existing policies compared with the recommended one (10:02.01).
• Identify yourself. Before a presentation, the agent must tell the prospect he or she is acting as a life or health agent and identify, in writing, the agent and the insurer's full name; a compliant business card is enough (10:14).
• Dividends are not guaranteed. Any reference to dividends must say so; guaranteed and non-guaranteed benefits must be shown side by side; "vanishing premium" and similar terms may not mislead (10:04, 10:04.01).
• Testimonials must be genuine; a paid one carries "Paid Endorsement" (10:09). No unfair comparisons, implied government approval or "special" offers unless true (10:12 to 10:16).
• Filing. An insurer that fails to comply must file advertising for approval before use; a filing not disapproved within 30 days is deemed approved (10:20). The advertising file is kept five years after last authorized use (10:02.01).

Criminal statutes. Misrepresenting policy terms or dividends, or using a policy name that misstates its nature, is a Class 2 misdemeanor (SDCL 58-33-5); so is an untrue or misleading advertisement (SDCL 58-33-6) and twisting, a misleading or incomplete comparison made to induce a policyholder to lapse, surrender, exchange or convert a policy (SDCL 58-33-8). Unfair discrimination in life rates, dividends or terms between people of the same class and equal life expectancy is also a Class 2 misdemeanor (SDCL 58-33-12).

7.2 Illustrations and the Buyer's Guide (Outline: II.A.1.b)

An illustration shows non-guaranteed elements of a life policy over a period of years; the director must adopt rules on formats and disclosures (SDCL 58-33-5.1), found in ARSD chapter 20:06:38.

• Scope. Group and individual life, except variable life, annuities, credit life, and policies with no illustrated death benefit over $10,000 on any individual (20:06:38:02).
• With or without. The insurer tells the director whether each form is marketed with or without an illustration. If without, no illustration may be used before the first policy anniversary (20:06:38:03).
• Content. Labeled "life insurance illustration"; shows insurer, agent, insured's name, age and sex, rating class, generic and product name, form number, initial death benefit (20:06:38:04).
• Prohibited. Implying non-guaranteed elements are guaranteed, an incomplete illustration, implying premiums will not be required each year, "vanish" or "vanishing premium," lapse-supported or non-self-supporting illustrations (20:06:38:05).
• Delivery. If used and the policy is applied for as illustrated, a signed copy goes to the insurer with the application and a printed copy to the applicant no later than submission (a signed acknowledgment may replace it for a screen illustration) (20:06:38:13). If none was used, the agent certifies that in writing, the applicant acknowledges it, and a conforming signed illustration goes with the policy no later than delivery (20:06:38:14). The insurer keeps it until three years after the policy is no longer in force (20:06:38:16). An owner may request an in-force illustration without signing anything (20:06:38:23).

Buyer's guide and policy summary. Before accepting the initial premium or deposit, the insurer must give every prospective life purchaser a buyer's guide and a policy summary (a compliant illustration may replace the summary) (SDCL 58-33A-9). The rule allows delivery either before the initial premium or with or before the policy; the summary goes only to buyers of forms marketed without an illustration and shows guarantees only (ARSD 20:06:10:21). The guide must be the NAIC Life Insurance Buyer's Guide (20:06:10:30); the summary is a separate document titled "STATEMENT OF POLICY COST AND BENEFIT INFORMATION" (20:06:10:26, 20:06:10:27). Failure to deliver either may violate SDCL 58-33-5 (20:06:10:28).

7.3 Insurable Interest (Outline: II.A.1.c)

• Own life. A competent individual may insure his or her own life for anyone's benefit. Insurance on another requires benefits payable to the insured, the insured's personal representative, or a person who had an insurable interest when the contract was made (SDCL 58-10-3).
• Who has an interest (SDCL 58-10-4): people closely related by blood, marriage or law with a substantial interest from love and affection; others with a lawful and substantial economic interest in the insured's continued life, not one that arises only from the death; parties to a buy-sell contract; a 501(c)(3) charity with the insured's consent; a financial institution, to the extent of the debt owed; and a trustee of a trust established by an individual settlor.
• Remedy. Benefits paid to a beneficiary or assignee under a contract that violates the rule may be recovered by the insured's personal representative (SDCL 58-10-5).
• Consent. No life or health contract on an individual (other than group life or group or blanket health) takes effect unless the individual applies or consents in writing, except that a spouse may insure the other spouse, a person with an insurable interest in or support duty to a minor may insure the minor, and a family policy may be applied for by a parent, stepparent, or spouse (SDCL 58-10-6).
• Assignment and entities. Incidents of ownership may be assigned with the spouse's written consent, and the transfer is not invalid for lack of the transferee's insurable interest (SDCL 58-10-6.1). An entity created to hold insurance on a settlor may not sell or transfer the policy or its ownership to anyone without an insurable interest in the same settlor (SDCL 58-10-17).

7.4 Military Sales (Outline: II.A.2)

South Dakota regulates life insurance and annuity solicitation of active duty service members (SDCL 58-33-117 to 58-33-130). "Active duty" is full-time duty; Guard and Reserve members count only on orders of 31 days or more. The code creates no private cause of action (SDCL 58-33-117, 58-33-118).

Excluded include credit insurance, group coverage without face-to-face solicitation or a side fund, conversions, stand-alone health and disability income, SGLI and VGLI, and funding of ERISA, qualified, governmental and deferred-compensation plans and prearranged funerals (58-33-119). General advertising, direct mail and internet marketing are not solicitation; neither is a telephone call that clearly says the product is life insurance, but a face-to-face meeting resulting from them is covered (58-33-121).

7.5 Policy Replacement (Outline: II.B)

Purpose and definitions (II.B.1, II.B.2)

Article 20:06:08 has no stand-alone purpose section in current text; the old purpose rule (20:06:08:02) is repealed. The current rules, effective January 1, 2013, implement the SDCL 58-33-5, 58-33-6 and 58-33-8 prohibitions on misrepresentation, false advertising and twisting (ARSD 20:06:08:38, 20:06:08:65).

A replacement is a transaction in which a new policy or contract is purchased and it is known or should be known to the proposing producer (or the insurer if no producer) that an existing policy or contract has been or will be: lapsed, surrendered, partly surrendered, assigned to the replacing insurer or otherwise terminated; converted to reduced paid-up or extended term or otherwise reduced in value; amended to reduce benefits or term; reissued with reduced cash value; or used in a financed purchase (funds withdrawn, surrendered or borrowed from the old policy to pay premium on the new) (ARSD 20:06:08:38). Using an existing policy's values to pay premium on a new policy of the same insurer within four months before or thirteen months after its effective date is prima facie evidence of intent to finance (20:06:08:49.01).

Exemptions (II.B.3)

The rules do not apply to: credit life; group life or annuities with no direct producer solicitation (direct response group certificates are covered by 20:06:08:63); group coverage funding prearranged funerals; an application to the existing insurer for a contractual change, conversion or approved same-insurer program, or a term conversion among affiliates; replacement of coverage under a binding or conditional receipt of the same company; policies funding ERISA, 401(a), 401(k), 403(b), governmental, church, 457 or nonqualified deferred compensation plans (with an exception for employer-funded plans offering a choice of insurers and direct solicitation); employer- or association-paid new coverage; existing non-convertible term that expires in five years or less and cannot be renewed; immediate annuities bought with proceeds of an existing contract; and structured settlements (ARSD 20:06:08:49).

Duties of the producer (II.B.4)

Impermissible conduct: deceptive sales material; not asking the replacement questions; intentionally recording an answer incorrectly; advising the applicant to answer "no" to avoid notice to the existing insurer; and advising an owner to write to the company so as to obscure the replacing producer. A pattern of owners replacing after saying they did not intend to is prima facie evidence of the producer's knowledge and intent to violate the rules (ARSD 20:06:08:64).

Duties of the replacing insurer (II.B.5)

Where a producer is used, the replacing insurer must verify the forms are received and compliant; notify any affected existing insurer within five business days of a completed application indicating replacement; mail the available illustration or policy summary within five business days of the existing insurer's request; keep notices indexed by producer for five years or until the next regular examination, whichever is later; and give the owner notice of the right to return the policy or contract within 30 days of delivery for an unconditional full refund of premiums, including fees and charges. If the replacing and existing insurers are the same or affiliated, it must credit time already run on the replaced policy's incontestability and suicide periods, up to the old face amount (ARSD 20:06:08:60). It also keeps supervision systems and signed statements for five years after the policy ends (20:06:08:54 to :57).

The existing insurer must, within five business days of a replacement notice, tell the owner of the right to information on the existing policy, provide it within five business days of a request, and on a request to borrow, surrender or withdraw send a notice that releasing values may affect guarantees, face amount or surrender value (20:06:08:62). In direct response sales, the application asks whether a replacement is intended and the insurer sends the Appendix E or F notice (20:06:08:63).

In South Dakota

The replacement 30-day refund right is separate from the ten-day statutory free look every individual policy carries. When a stem says the new policy replaces an existing one, the figure the replacing insurer must disclose is 30 days; when it says nothing about replacement, the statutory free look is ten days of actual receipt.