Terraform will perform the following actions:

  # aws_instance.example-list will be updated in-place
  ~ resource "aws_instance" "example-list" {
        id                                   = "i-0e0f189eb341d211f"
        tags                                 = {}
      ~ vpc_security_group_ids               = [
          - "sg-0541801a7a059ba17",
          + "default",
        ]
        # (30 unchanged attributes hidden)

        # (8 unchanged blocks hidden)
    }

Plan: 0 to add, 1 to change, 0 to destroy.
aws_instance.example-list: Modifying... [id=i-0e0f189eb341d211f]
╷
│ Error: updating EC2 Instance (i-0e0f189eb341d211f): modifying network interface: InvalidGroup.NotFound: The security group 'default' does not exist
│       status code: 400, request id: 0aaeef89-d273-470f-9a39-9e298de841c9
│
│   with aws_instance.example-list,
│   on list.tf line 7, in resource "aws_instance" "example-list":
│    7: resource "aws_instance" "example-list" {
│
╵

Answer

USE Security Group ID instead of Security Group Name.