Definition
1035 Exchange
A tax-free exchange of one life insurance policy for another under IRC §1035.
Full definition
Section 1035 permits the tax-free exchange of one life insurance contract for another (with the same insured). PPLI is often the destination of a 1035 exchange from an underperforming retail VUL, provided the receiving policy is properly qualified and the MEC status of the transferred policy is respected.
Related terms
PPLI (Private Placement Life Insurance)
A privately negotiated variable universal life insurance contract offered only to Accredited Investors and Qualified Purchasers.
Modified Endowment Contract (MEC)
A life insurance contract that fails the §7702A seven-pay test, losing tax-free access to cash value during life.
Availability, tax treatment, and policy design depend on jurisdiction, carrier, investor qualification, and applicable law. simpleppli.com provides general educational information only — not tax, legal, insurance, or investment advice. Consult qualified tax counsel, insurance counsel, and licensed insurance professionals before implementing any PPLI structure.