A 1035 exchange is a provision in the Internal Revenue Service (IRS) code allowing for a tax-free transfer of an existing annuity contract, life insurance policy, long-term care product, or endowment for another of like kind.

Rules may vary by company, but full and partial 1035 exchanges are allowed. Typically, 1035 exchanges between products within the same company are not reportable for tax purposes as long as the exchange criteria are satisfied.