Free Life Policy Provisions Options and Riders Study Guide
South Dakota Life exam — Life Policy Provisions Options and Riders.
The national guide explains the standard life policy provisions, nonforfeiture options and riders. South Dakota sets its own required provisions in SDCL 58-15, and the exam asks for its exact periods and limits. This guide lists them, along with South Dakota's insurable interest and consent rules (SDCL 58-10).
Required provisions
| Provision | South Dakota rule |
|---|---|
| Free look (58-15-8.1) | The owner may return an individual life policy within 10 days of actual receipt for a premium refund. The policy is then void from the beginning. It can be returned to the insurer or the producer. |
| Replacement free look (ARSD 20:06:08:60) | When a policy replaces existing coverage, the right to return it lasts 30 days from delivery, for an unconditional full refund. |
| Entire contract (58-15-8) | The policy, or the policy plus the attached application, is the entire contract. Absent fraud, application statements are representations, not warranties. |
| Misstatement of age (58-15-9) | The benefit is what the premium would have bought at the correct age. |
| Incontestability (58-15-10) | After 2 years in force during the insured's lifetime, the policy is incontestable except for nonpayment of premium or fraud. |
| Grace period (58-15-13) | 30 days (4 weeks for certain industrial policies). Coverage continues. If the insured dies during the grace period, the overdue premium is deducted from the claim. |
| Policy loans (58-15-15, 58-15-15.6, 58-15-17, 58-15-19) | Available once 3 full years' premiums are paid and there's a cash value. Interest is capped at 8% a year or an adjustable maximum rate. The insurer may defer a loan, other than one to pay premiums, for up to 6 months. If the debt reaches the loan value, the policy can end only after 30 days' mailed notice. |
| Reinstatement (58-15-22, 58-15-68) | Available within 3 years of default (2 for industrial policies). The owner applies in writing, shows insurability and pays the arrears with interest. A reinstated policy can be contested for misstatements in the reinstatement application only for the same period that applied after original issue. |
| Interest on death proceeds (58-15-26.2) | Runs from the date of death at 4% a year, or the insurer's settlement-option rate if higher. |
| Time to sue (58-15-51) | A policy can't limit suits to less than 6 years after the cause of action accrues. |
Permitted exclusions (SDCL 58-15-45, 58-15-46)
Only these exclusions are allowed:
- War. It can't be enforced unless the applicant is told about it at delivery.
- Aviation or air travel.
- Specified hazardous occupations.
- Suicide within 2 years of issue, whether the insured is sane or insane.
When an exclusion applies, the insurer must return all premiums paid, adjusted for loans and dividends. It doesn't pay the face amount.
Assignment
The insurer may treat an assignee as owner or pledgee until its home office receives written notice that the assignment has ended or that someone has a conflicting claim (58-11-36).
Insurable interest and consent (SDCL 58-10)
- Insurable interest must exist when the contract is made (58-10-3). It doesn't have to continue to the time of death.
- Statutory insurable interests include (58-10-4):
- a lender, up to the amount of the debt
- a party to a buy-sell agreement, for the purpose of the agreement
- a 501(c)(3) charity, with the insured's consent
- The insured must apply or consent in writing, with three exceptions (58-10-6):
- a spouse insuring the other spouse
- insurance on a minor by someone with an insurable interest
- family policies
- If a policy was issued without insurable interest, the insured or the insured's personal representative can recover the benefits from the beneficiary (58-10-5).
- Creditor exemption: life or health proceeds up to $20,000 are exempt from the debts of the insured, the surviving spouse or the children (58-12-4).
Common exam traps
- Life free look: 10 days. It becomes 30 days for a replacement.
- Grace period: 30 days, not 31.
- Incontestability exceptions: nonpayment and fraud.
- A suicide exclusion leads to a return of premiums, not the face amount.
- Policy loan interest is capped at 8%. A loan can be deferred up to 6 months.
- Reinstatement is available for 3 years.
Practice Life Policy Provisions Options and Riders questions All Life topics
Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.
