'Life-Settlement' Deals May Have Personal Implications.

IF you have a life insurance policy that you don't need or want anymore, you might be thinking of selling it. You were probably attracted by an ad for "life settlements" or "senior settlements." That's cash money for a policy that you'd otherwise let go. But this is more than a purely financial decision said life insurance expert Joseph Belth, editor of The Insurance Forum in Bloomington, Ind. You also should think about the personal implications before closing the sale.

First, a brief explanation of the life-settlement business. Many older Americans own life insurance policies that no longer serve a purpose.

Maybe you've owned term nsurance all your life. You've now retired and have enough assets for your family. The term premiums are going to rise and you don't want to pay them.

Maybe you bought universal life insurance but didn't invest enough money in the policy. When these policies are short of cash, they eventually lapse.

Maybe your small company bought a "key man" policy on your life, to protect its interests if you died young. Now you're retiring and the insurance isn't needed.

In any of these situations, you may be able to sell your policy to an investor for cash upfront. The investor pays your future premiums and gets the insurance proceeds when you die.

These are called "life-settlement" deals. They're offered by the same companies that handle what's known as viatical settlements. You see their ads in senior publications newspapers or on the Web. In a classi viatical transaction, the policy is sold by a per on who is terminally ill. The patient receives some fraction of the policy's face value.

Investing in policies

Life-settlement transactions Work the same way. You take a medical exam. A doctor evaluates your life expectancy. If your life expectancy is shorter than normal, you II be offered some fraction of your policy's face value. The life-settlement company finds investors who want to buy it. They collect your policy's proceeds when you die.

You often see ads inviting healthy people to sell their policies.

That's misleading. To find an investment, your health has to be impaired (Doug Head, who runs the Viatical and Life Settlement Association of America in Orlando, Fla., said that, by "healthy." the industry actually means "a little sick," or "won't live to full life expectancy.") For seniors who no longer need their policies, life settlements sound like a simple shot at easy money. You get paid for something that otherwise would have little or no value.

But here's one more thing to think about.

The life-settlement company will have access to your medical records, not just now but forever, Belth said. The company also has to be able to track you to see if you're still alive. You'll be called periodically. Maybe your children will be called.

If you don't die "on time," your investors may start losing money on you. They'll have to pay more premiums than they expected. Most investors are decent people who will leave you alone. But what if your policy gets caught in a money laundering scheme?

Even if you sold to a firm you trusted, it could resell your policy to someone else. You've completely lost control.

Life-settlement deals are often peddled to older people as a "safe" investment with a "guaranteed" return.

Longer life, lower value

Those are misleading claims. Belth doubts that any investor can make money unless the person who sells the policy has significant health problems.

When you buy an interest in a stranger's insurance policy, you have to pay all of the policy' s future premiums, plus an upfront payment to the seller, plus the slice that the middlemen take off the top. The brokers alone generally get up to 12 percent.

You get an estimate of how long the seller has to live. If the seller dies "on time" or earlier, you'll make money. The earlier the death, the better you'll do.

Save Money for College by Spending

Can you spend your way into building a college-savings account? A new company called Upromise thinks the answer is yes.

Upromise's idea sounds good Every time you buy certain goods or services, or shop at certain stores, a small portion of your purchase can be funneled into a college account. You'll save money without even thinking about it.

To build a tidy sum, however, you have to patronize the sponsoring merchants -- not just now but for years into the future. Will you buy books at Borders rather than Amazon? Choose AT&T over WorldCom? Do all your toy shopping at Toys "R" Us? Use a Citibank credit card rather than one from Fleet or American Express?

If the answer is yes, you'll earn rebates linked to the amount you spend. The merchants pay with marketing dollars diverted from other forms of advertising.

Your rebates go into a non-interest-bearing Upromise brokerage account at Citibank. From there, you can move them into what's known as a 529 college-savings plan.

A 529 plan invests in stocks and bonds and earns money tax deferred. When cash is withdrawn for higher education, the earnings are taxed in your child's bracket, not yours. Your can use the money at any accredited U.S. school.

Please note -- you do not have to belong to Upromise to contribute to a 529. These savings plans are established by the states. If you save through your own state's plan, you generally get special breaks on any state income tax you owe.

Many 529 plans accept savers who live in other states (although non-residents don't qualify for state income tax breaks). For details on 529s, see savingforcollege.com.

Upromise links your everyday spending to a 529 plan, provided that you spend in a certain way.

The key is persistence. If customers like Upromise and if merchants stick with it, you'll build some extra college savings unawares.