• Washington Post, Friday, May 1, 2009 11:46 AM

Members of the Senate Special Committee on Aging are concerned about dangers for senior citizens lured by ads that invite them to cash in their life insurance policies by selling them to investors, David S. Hilenrath reports. Panel chairman Herb Kohl (D-Wis.) says selling a life insurance policy "can be fraught with possible hidden pitfalls."

Investors offer policyholders more than they could collect from their insurance companies for surrendering their policies, or they enable consumers to liquidate policies for cash instead of allowing coverage to lapse. By targeting people who aren't expected to live long, they can beat insurers at their own game.

Much of the criticism at the hearing Thursday -- which the agenda described as "Betting on Death in the Life Settlement Market" -- focused on a strategy in which promoters offer senior citizens enticements to take out policies just to flip them to investors. Seniors who do that "may not know that they are participating in insurance fraud," Kohl says.

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