Cash Out That Life Insurance at Your Own Risk

An increasing number of retirement-age Americans are considering an unfamiliar financial scheme -- a way to tap into the value of their life insurance through what are known as "life settlements." But consumer advocates urge policyholders to be cautious, because a number of the companies operating in the industry have murky histories, possibly involving fraud.

Life settlement companies persuade financially secure seniors to sell their life insurance policies. The sellers get a payout that's greater than the cash value of the policy.

Meanwhile, the purchasing company keeps paying the premiums and eventually collects on the insurance payout when the former policyholders die. ...