What Issues Should I Consider When Doing a Section 1035 Exchange?
Overview
A 1035 exchange exists to solve a specific problem: moving to a better-fitting policy without giving up the tax deferral built into the original one. It only works within certain rules, though, and getting the mechanics wrong can undo the benefit.
Before exchanging, it's worth comparing surrender charges on the old contract against the features and costs of the new one, since a 1035 exchange avoids a tax problem, not necessarily a cost problem.
What this checklist covers
- 1General exchange rules
- 2Life insurance exchange issues
Common questions

Review the contract with the full checklist
The terms, fees, and guarantees worth checking line by line.
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