South Dakota Life & Health Study Guide

Thirty scored questions on this paper are South Dakota-specific — the largest state section the state publishes — and the guaranty association carries the heaviest concentration of them. South Dakota’s life and health guaranty statute is not organised the way the NAIC model is, its caps are not keyed to the date of insolvency, and a citation written at the ordinary depth points at an entirely different provision. Get the structure right and eight figures fall into place; get it wrong and every one of them is unciteable.

Lettered subparts, not numbered subsections

SDCL 58-29C-46 is catchlined “Persons provided with coverage — Policies and portions of policies not covered,” and its top level is lettered subparts A, B, C and D.

The caps sit inside subpart C. The exclusions sit inside subpart B. So a cite to “58-29C-46(3)” — which looks like the natural way to write it — points at subpart B(3), a long-term care provision about the reach of an exclusion, and not at a cap at all.

The full depth runs subpart, then numbered subdivision, then lettered subparagraph, then lowercase roman, then uppercase roman in parentheses. A correct cite for the disability income cap is 58-29C-46 C(2)(a)(ii)(II). Five levels, and the first of them is a letter.

The eight figures, and the four units that go with them

Benefit	Cap	Pin cite
Life death benefit	$300,000	C(2)(a)(i)
Life net cash surrender and withdrawal	$100,000 — a sub-limit inside the same clause	C(2)(a)(i)
Health, residual	$100,000	C(2)(a)(ii)(I)
Disability income and long-term care	$300,000 each	C(2)(a)(ii)(II)
Health benefit plans	$500,000	C(2)(a)(ii)(III)
Annuity present value	$250,000	C(2)(a)(iii)
Structured settlement annuity	$250,000 per payee, in the aggregate	C(2)(b)
Overall aggregate	$300,000, or $500,000 for health benefit plans	C(2)(c)(i)
Multiple nongroup life, one owner	$5,000,000	C(2)(c)(ii)

The $100,000 is not a second cap. The clause reads “Three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance.” One subparagraph, two interacting ceilings.

And the units change between clauses. C(2)(a) is “With respect to one life, regardless of the number of policies or contracts.” C(2)(b) is per payee of a structured settlement, “in the aggregate.” C(2)(c)(i) is per one life or one individual. C(2)(c)(ii) is per owner — “regardless of the number of policies and contracts held by the owner.” Four clauses, four denominators.

Over all of it sits a floor written into subpart C’s opening words: the association’s obligation is “the lesser of” the contractual obligation the insurer owed and the statutory cap. The cap is never a top-up.

Two scoping rules that decide how a rider is capped

Buried in the same section are two provisions that reverse each other, and both are examinable.

Subpart B(3) provides that the exclusion at subsection (2)(c) — the interest-rate exclusion — “does not apply to any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefits.” So long-term care and health benefits escape that exclusion.

Subpart C(2)(e) goes the other way on the caps: “benefits provided by a long-term care rider to a life insurance policy or annuity contract are considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.” So an LTC rider is capped as life or annuity, not at the $300,000 long-term care figure.

An LTC rider therefore sits outside one exclusion and inside a different cap from a standalone LTC policy. That asymmetry is precisely the kind of thing a thirty-question state section asks about.

And C(2)(d) adds a measurement rule worth carrying: the limits apply “before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer.”

The advertising ban is an open class

SDCL 58-29C-62 prohibits using the association’s existence as a sales inducement, and the words that matter are the ones that open it:

“No person, including a member insurer, agent, or affiliate of a member insurer may make, publish, disseminate, circulate, or place before the public …”

“Person” is the class. The list of insurer, agent and affiliate is illustrative, introduced by “including.” So the prohibition reaches anyone — a marketing firm, a lead vendor, an unlicensed promoter — and not only the three named categories.

That matters because the property and casualty chapter is drafted the other way. 58-29A-104 opens “It is unfair trade practice for any insurer or insurance producer” — a closed two-member class. The two chapters genuinely differ, and any study material that harmonises them narrows the life and health ban or widens the property one.

58-29C-62 also carries an affirmative duty: the member insurer must deliver a summary document of the chapter’s purposes and limitations, containing a disclaimer the director establishes, warning that coverage may be unavailable or subject to substantial limitations.

Four free looks and one replacement rule

This paper is where South Dakota’s two ten-day free looks collide, so hold them apart by trigger rather than by number.

Life, 58-15-8.1: ten days from actual receipt by the purchaser, on a written request, and the policy may be returned to the home office, a branch office, “or to the insurance producer through whom it was purchased.”

Accident and health, 58-17-11: ten days from delivery, excluding single premium nonrenewable policies.

Medicare supplement, 58-17A-8: thirty days from delivery, with the refund paid “directly to the applicant by the issuer within thirty days of receipt of the returned policy.”

Long-term care, 58-17B-9: thirty days from delivery.

Replacement, meanwhile, is a rule rather than a statute. ARSD 20:06:08:50 requires the producer to obtain a statement signed by both parties as to whether existing policies or contracts are in force. If the applicant answers yes, the producer must “present and read to the applicant, not later than at the time of taking the application,” the Appendix D replacement notice, sign it with them and leave it with them. If the applicant answers no, “the producer’s duties with respect to replacement are complete.” The duty is conditional on the answer, and stating it absolutely is wrong.