Seniors who have life insurance policies could fall prey to a relatively new financial product called the life settlement.

In this case you're encouraged to sell your life insurance policy for more than its current cash value but less than its face. The pitch encourages you to get the cash while you're still alive and use it for a big vacation or even to buy long-term care insurance.

If you no longer need insurance but want more cash, this will bring in more money than just cashing in the old policy.

But if you do still need insurance, a life settlement is a bad idea. You may no longer be insurable, or you may not be able to afford much higher rates.

You may also create a tax liability for your heirs. Generally, insurance benefits paid to a beneficiary are tax free, but the profits from selling your insurance contract are taxable at ordinary income tax rates. Once you sell your policy you can't get it back.

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