Section 1035 Exchange

A tax-free exchange of an existing annuity contract for a new one.

Investopedia Says:
In order for the new contract to qualify as a Section 1035 Exchange, the policyholder must have his or her existing contract for an equivalent new contract. The annuitant or policyholder must also remain the same. Application of a check received for the old contract against the new contract does NOT qualify.

Related Links:
If this investment product has caused you sleepless nights, it's time to consider alternatives. Taking The Bite Out Of Annuity Losses
These may look like good retirement vehicles, but beware of fees buried in the fine print. Passing the Buck: The Hidden Costs of Annuities

Section of the Internal Revenue Code that provides for the taking of the proceeds from one Life Insurance policy or Annuity and the reinvesting of these proceeds immediately in another life insurance policy or annuity of the same type without being required to pay a tax on any gain. This exchange should be handled by the seller of the Replacement, Life Insurance policy or annuity.