Key Takeaways
- South Dakota requires written notice when replacing life insurance policies
- New contestability period begins with policy replacement
- Producers must disclose all costs associated with replacement
- Replacement records must be maintained
- Twisting and churning are prohibited practices
Last updated: January 2026
South Dakota Replacement Rules
Replacement occurs when a new life insurance policy or annuity is purchased and an existing policy is terminated or reduced.
Definition of Replacement
A replacement occurs when a new policy is purchased and:
- An existing policy is lapsed, forfeited, or surrendered
- Policy values are reduced or borrowed against
- Coverage is converted or reduced
- Policy is amended to reduce benefits
Required Disclosures
The producer must provide disclosures including:
| Item | Requirement |
|---|---|
| Comparison | Side-by-side of existing and new policy |
| Surrender Values | Current and projected values |
| Death Benefits | Comparison of coverage amounts |
| Premium Costs | Cost difference over time |
| Surrender Charges | Charges for early termination |
| New Contestability | New 2-year period starts |
Prohibited Practices
Twisting
Twisting is making misrepresentations to induce replacement:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Making incomplete comparisons
Churning
Churning is excessive replacement to generate commissions:
- Multiple replacements for same client
- Pattern of replacements in book of business
Test Your Knowledge
What happens to the contestability period when a life insurance policy is replaced in South Dakota?
A
B
C
D