The Journal article, while touching on the controversial nature of the life-settlement industry, does not conclude -- and would be wrong to conclude -- that life settlements are always or even usually a sucker deal for policyholders who sell out.

The reason why the market exists is because of the gap between the low cash-surrender value of life insurance policies and the actual market value of those policies. If the policyholder no longer needs the insurance (e.g., dependents have become self-sufficient) or other needs have taken precedence (e.g., immediate health care or long-term care), then a life settlement might be a good idea.

I also think it's wrong to say that buying and immediately selling out to a life settlement company is a bad idea. It may be bad for life insurance companies, but it's unclear that it's a sucker deal for policyholders. That's not to say that Larry King didn't get screwed over. I'm just saying you can't draw any kind of conclusion about the practice as a whole from his experience.