If there is no gain on the existing contract, or if there are loans outstanding that may represent a partial gain, a 1035 Exchange would not offer an advantage. , If the existing policy is a variable or universal contract that contains a “market rate adjustment” provision, the proceeds received in an exchange may be lower than in an immediate surrender. This may depend on market conditions and the time it takes to process the exchange. , A 1035 Exchange is more cumbersome and time consuming than a policy surrender. The timing is uncertain and the process can often take several months. The policy owner’s intentions, the economic climate, and the financial condition of the current carrier can all be factors in the decision to effect a 1035 Exchange.