Practice Quiz

Health and Life Insurance

Category - Tax Issues

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Under IRS Section 1035 rules, a life insurance policy may be exchanged penalty-free for a(an) __________.
  1. Annuity
  2. Endowment contract
  3. Both A and B
  4. Neither A nor B
Explanation
Answer: C - Under IRS Section 1035 rules, a life insurance policy may be exchanged penalty-free for another life insurance policy. A life insurance policy may also be exchanged for an annuity or for an endowment contract. It is important to note that an annuity may only be exchanged for another annuity and an endowment contract may only be exchanged for another endowment contract or an annuity.
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