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SOUTH DAKOTA - Insurable Interest Laws
As of August 1, 2007
Most recent legislation changes: March 2, 2006
§ 58-10-3.
Any individual of competent legal capacity may procure or effect an insurance
contract upon his own life or body for the benefit of any person. But no person
shall procure or cause to be procured any insurance contract upon the life or
body of another individual unless the benefits under such contract are payable
to the individual insured or his personal representatives, or to a person
having, at the time when such contract was made, an insurable interest in the
individual insured.
§ 58-10-4. Insurable interest with reference to personal insurance includes only interests as follows:
Insurable interest with reference
to personal insurance includes only interests as follows:
(1) Interests in individuals related closely by blood, marriage, or by law, a
substantial interest engendered by love and affection;
(2) For other persons, a lawful and substantial economic interest in having
the life, health, or bodily safety of the individual insured continue, as
distinguished from an interest which would arise only by, or would be enhanced
in value by, the death, disablement, or injury of the individual insured;
(3) A person who is a party to a contract or option for the purchase or sale
of an interest in a business partnership or firm, or of shares of stock of a
closed corporation or of an interest in the shares, has an insurable interest in
the life of each individual party to the contract and for the purpose of the
contract only, in addition to any insurable interest which may otherwise exist
as to the life of the individual;
(4) A charitable organization that meets the requirements of section 501(c)3
of the Internal Revenue Code of 1986, as amended to January 1, 1992, and owns or
purchases life insurance on an insured who consents to the ownership or purchase
of the insurance has an insurable interest in the life of the insured;
(5) A financial institution, as defined in subdivision 10-43-1(4), to whom a
debt is owed has an insurable interest in the life of the insured to the extent
of the debt owed by the insured, irrespective of any statute of limitation
regarding the enforceability of the debt;
(6) The trustee of a trust established by an individual settlor has an
insurable interest in the life of that individual settlor, and has the same
insurable interest in the life of any other individual as does such individual
settlor. However, the settlor must be the insured or have an insurable interest
as required by subdivisions (1) to (5), inclusive, of this section. The trustee
of a trust has the same insurable interest in the life of any other individual
as does any beneficiary of the trust with respect to proceeds of insurance on
the life of such individual or any portion of such proceeds that are allocable
to such beneficiary's interest in such trust. If multiple beneficiaries of a
trust have an insurable interest in the life of the same individual, the trustee
of such trust has the same aggregate insurable interest in such individual's
life as such beneficiaries with respect to proceeds of insurance on the life of
such individual or any portion of such proceeds that are allocable in the
aggregate to such beneficiaries' interest in the trust. A trustee of a business
trust has the same insurable interest in the life of any individual as does any
beneficial owner in any individual or any beneficial owners in the aggregate in
any individual.
§ 58-10-5.
If the beneficiary, assignee, or other payee under any contract made in
violation of § 58-10-3 receives from the insurer any benefits thereunder
accruing upon the death, disablement, or injury of the individual insured, the
individual insured or his executor or administrator, as the case may be, may
maintain an action to recover such benefits from the person so receiving them.
§ 58-10-6.
No life or health insurance contract upon an individual, except a contract of
group life insurance or of group or blanket health insurance, shall be made or
become effective unless at the time of the making of the contract such
individual applies therefor or has consented thereto in writing, except in the
following cases:
(1) A spouse may effectuate such insurance upon the other spouse.
(2) Any person having an insurable interest in the life of a minor, or any
person upon whom a minor is dependent for support and maintenance, may
effectuate insurance upon the life of or pertaining to such minor.
(3) Family policies may be issued insuring any two or more members of a
family on an application signed by either parent, a stepparent, or by a husband
or wife.
§ 58-10-6.1.
Subject to the policy terms on assignment, a person whose life is insured
under a policy of life insurance may assign with his spouse's written consent
any or all incidents of ownership granted him under the policy, including but
not limited to any right to designate a beneficiary or to pay premiums. If a
policy of life insurance has been issued in conformity with this section, no
transfer of the policy or any interest thereunder shall be invalid by reason of
a lack of insurable interest of the transferee in the life of the insured or the
payment of premiums thereafter by the transferee. Insurance contracts which were
assigned before July 1, 1989, shall be deemed enforceable under this section.
§ 58-10-13. "Trust" defined --
"Beneficiary" defined
For purposes of subdivision 58-10-4(6), the term, trust, includes any trust,
including a business trust, and the term, beneficiary, includes the interest of
any beneficiary in a trust, including a beneficial owner of a business trust.
§ 58-10-14. "Business trust" defined
For purposes of subdivision 58-10-4(6), the term, business trust, means a business trust subject to chapter 47-14A or chapter 47-14B.
§ 58-10-15. "Insurance
contract" for which an insurable interest exits defined
An insurance contract for which an insurable interest exists under subdivision
58-10-4(6), is a life insurance policy issued for delivery to a trust governed
by South Dakota law.
§ 58-10-16. Retroactive effect
The provisions of subdivision 58-10-4(6) and §§ 58-10-2 to 58-10-4, inclusive,
are effective retroactively to November 2, 1889.
This information does not constitute legal advice by the Insurance Barometer LLC and should not be relied upon as such. Every effort has been made to provide correct and accurate information but the reader should verify state laws prior to implementing an insurance program.