South Carolina Life Insurance Policy Requirements

South Carolina law imposes specific requirements on life insurance policies sold in the state under Title 38 of the South Carolina Code of Laws. These requirements protect consumers and ensure policy standardization.

Free Look Period

South Carolina provides a free look period for life insurance:

During the free look period, the policyholder can:

• Review the policy thoroughly
• Return it for a full refund of premiums paid
• No questions asked, no penalty

Exam Tip: Mail order policies in South Carolina have a 30-day free look period, which is longer than the standard 10-day period for policies sold through agents.

Incontestability Clause

South Carolina requires a 2-year incontestability clause in all life insurance policies:

• After 2 years from issue, the insurer cannot contest the policy based on misstatements
• Exceptions: Fraud, non-payment of premiums, or violation of policy conditions
• If policy is reinstated, a new 2-year period begins
• Protects beneficiaries from denied claims due to application errors

Rescission During Contestability

Under South Carolina law:

• Insurer must send certified letter proposing rescission
• Must include notice that company seeks to void policy
• Policyholder does not have to agree to rescission
• If rescinded, no benefits are payable

Suicide Clause

South Carolina limits the suicide exclusion under Section 38-63-225:

• Suicide exclusion cannot exceed 2 years from policy issue
• The period runs from the original effective date of coverage
• New period cannot be imposed for guaranteed purchase options
• New period cannot be imposed when exercising conversion privilege

Grace Period Requirements

South Carolina mandates grace periods for premium payments:

During the grace period:

• Policy remains in full force
• Death benefits are payable (minus unpaid premium)
• Policy lapses at end of grace period if premium not paid

Beneficiary Protections

South Carolina has strong beneficiary protection laws:

Creditor Protection

Under South Carolina law:

• Proceeds payable to a beneficiary other than the insured's estate are exempt from creditors
• Cash surrender values expressed for the primary benefit of spouse, children, or dependents are protected
• Right to change beneficiary may be reserved without losing protection
• Proceeds payable to the estate are subject to creditor claims

Beneficiary Designation

• Policyowner has the right to name anyone as beneficiary
• Beneficiary designation must be stated in the policy
• Changes must be made according to policy provisions
• Charities may be named as beneficiaries with proper documentation

Insurable Interest

A bona fide charity or nonprofit corporation has an insurable interest when:

• The organization is irrevocably named as beneficiary
• The application is signed by the insured
• The organization complies with the Solicitation of Charitable Funds Act

Policy Delivery Requirements

South Carolina requires:

• Policy delivered within reasonable time of issue
• Policy delivery receipt should be signed
• Delivery must include policy and required disclosures

Required Policy Provisions

Under Section 38-63-220, life insurance policies must include: