A 1035 exchange is the process of selling one insurance contract and replacing it with another in a “like kind exchange” and realizing specific tax advantages.
A life insurance policy can be sold and the proceeds used to purchase another life insurance policy, a non-qualified annuity, or an endowment.
A non-qualified annuity can be sold and replaced with another non-qualified annuity.
An endowment policy can be sold and replaced with either a non-qualified annuity or an endowment policy as long as the maturity of the new endowment is not later than the original endowment.
1035 is the section of the US Tax Code that addresses certain exchanges of insurance policies, thus the name; 1035 exchange.