Life settlements: lifeline for the elderly or ripoff?

Are you older or in poor health? Here's a pitch that you'll hear a lot in the near future -- Your life insurance policy will pay plenty when you die; why not enjoy that money now when you need it?

Investors will buy your policy today, for a percentage of the settlement after you pass, and pay you a lot more than you'd receive if you simply cashed it in with the life insurance company. In 2005, individuals held an estimated $18.4 trillion in life insurance.

Is this a good deal? Last year, older Americans sold policies with a face value of $11.8 billion, for 20-200% more than they would have received by cashing them in. Types of insurance eligible include universal life, convertible term, whole life, and some specialized types such as group insurance.