Grim Reapers: Placing Bets on Your Death

In exchange for taking out the life insurance policy, the senior is promised a payment, such as the 1% mentioned in the letter above. Well, 1% of a $1 million policy is $10,000 -- a nice piece of change and hard to resist.

After the first two years, the investor buys the policy and keeps paying the premiums until the senior dies. Obviously, the investor is hoping that the senior dies sooner, rather than later. Then the investor will collect the $1 million.

Sometimes the investor sells the policy to another "investor," or several more. Ultimately, the senior never knows who owns this policy on her life. That's enough to make anyone queasy: Someone is walking around hoping you'll die so he can collect a million dollars!

It's not illegal to sell your insurance policy. In fact, if you've held a cash value life insurance policy for a few years, you've built up a "surrender value," which the insurance company will pay if you decide you don't need the insurance any more.

But often, these speculator/investors will offer to pay you more than the insurance company would give you. How much more? All they have to do is figure out the time value of the premiums they'll be paying on your policy until your death, and when you're likely to die. The eventual payoff to them is huge, especially if eventual is sooner, rather than later.

The insurance companies either don't know, or don't care, that this is going on. They get to book more policies and collect more premiums.

Before biting on this deal, ask yourself whether that cash payment is worth wondering if someone at the mall wants you to slip on a banana peel!

If you need life insurance, buy it. But you, your children or your irrevocable insurance trust, should own the policy. At least you know (hopefully) they're not betting against your life! And that's The Savage Truth.