South Dakota Life & Health Insurance Exam — All Questions

South Dakota requires individual life insurance policies to include a 'free look' (right to examine) provision. What does this give the policyowner?

• a.The right to change the insured person at any time
• b.A period (commonly at least 10 days) after delivery to return the policy for a full refund of premium✓
• c.A guarantee that premiums can never increase
• d.The right to borrow the full face amount immediately

A free-look or right-to-examine provision lets the policyowner return a newly delivered individual life policy within a stated period, commonly at least 10 days, and receive a full refund of premium. Replacement transactions often carry a longer review period. The provision protects consumers who change their mind after reviewing the actual contract.

How may a South Dakota producer refer to the state's life and health insurance guaranty association when making a sale?

• a.As a guarantee that the buyer can never lose any money
• b.As the main reason to buy from a particular insurer
• c.As a substitute for checking an insurer's financial strength
• d.Not at all as a sales inducement — using the guaranty association to sell insurance is prohibited✓

The South Dakota Life and Health Insurance Guaranty Association is a safety net that pays certain covered claims if a member insurer becomes insolvent, subject to statutory dollar limits. State law prohibits producers and insurers from using the guaranty association's existence as an inducement to buy insurance or in advertising. It is a backstop, not a selling point.

A South Dakota producer is replacing a client's existing life insurance policy with a new one. What does the state's replacement regulation generally require?

• a.Following replacement disclosure rules — giving the client required notice/comparison information and notifying the existing insurer✓
• b.Nothing special, because replacement is treated like any new sale
• c.That the client waive the free-look period on the new policy
• d.That the producer keep the transaction secret from both insurers

Replacement regulations (based on the NAIC model adopted in South Dakota) protect consumers by requiring the producer to provide notice and comparison information, obtain required signatures, and see that the existing insurer is notified so it can respond. The rules guard against unnecessary or misrepresented replacements that could harm the policyowner.