New insurance covers home purchase against buyer's accidental death
by Broderick Perkins
(2/4/2013) - It's relatively rare for a buyer to die unexpectedly during the open escrow process of a home sale.
However, the unfortunate does happen, leaving the transaction up in the air or at the behest of mourning heirs and other family members.
If the buyer passes, the seller is left holding the bag as the buyer's heirs turn to mourning and handling the affairs of a loved one's lost life.
Fortunately, a new, relatively inexpensive, Lloyds of London-backed insurance policy can remove doubt from both sides of the transaction in the event of a buyer's death.
Primarily for the seller, in the event of the buyer's accidental death, AssureClose effectively pays the mortgage and buys the home for resale, removing any doubt about how the transaction will proceed, allowing the seller's heirs to mourn in peace.
AssureClose also offers options for the buyer's heirs to recoup costs and purchase the home at a discount.
"We had many, many Realtors at the National Association of Realtors convention this year tell use of their own experiences with this. The feedback we received was very rewarding and gratifying. We hope to bring a lot of solace to a lot of sellers and buyers in the future who have no idea that this may happen to them as well," said Mia Burmeister-Laws an insurance agent, as well as a real estate agent with Roberts Brothers Inc., Mobile, AL.
Burmeister-Laws, AssureClose's director, founded AssureClose with its president and CEO Daryl Trawick, who also is president of Trawick International, an insurance provider, also of Mobile.
Death during escrow is rare, but it can happen. Burmeister-Laws said AssureClose grew out a client's accidental death the day before the close of escrow on a newly built custom home, five years in the making.
According to the Centers for Disease Control, accidental death is the fifth leading cause of death in the U.S., behind heart disease, cancer, chronic lower respiratory diseases and stroke.
Also, 41 percent of baby boomers, people born from 1946 to 1964 and 71 percent of people under the age of 34 (prime first-time home buying age), do not have a will, according to the AARP.
"If the seller has had the house for sale for a year, imagine how they would feel after putting in all that time and effort. If the buyer dies, they have to re-market it, get a new agent. The old agent is out a commission and his or her time and effort," said Burmeister-Laws, who offers the coverage for home buying transactions everywhere.
AssureClose comes with three basic coverage options, one for the seller and two for the buyer's heirs.
The insurance coverage is included in escrow documents as part of the sales contract the buyer and seller sign.
The coverage period for the insurance ranges from 30 days to 120 days, typically ample time to close a conventional escrow.
AssureClose for sellers
When the seller buys insurance coverage on the lives of the buyer (the buyer must sign on to agree to the coverage), should the buyer die of accidental causes, the deal proceeds through AssureClose.
AssureClose becomes the buyer and pays off the lender, the appraiser, all closing costs and fees, the attorney, the title company, the real estate agent's commission - all costs associated with the transaction - and takes possession of the property.
The insurance premium is based on the property value and the term of the coverage, from 30 days to 120 days. For example, a 60-day policy for a home valued at $200,000 costs $63.32. For 120 days, the cost is $126.64, according to a quote calculator on the AssureClose web site.
AssureClose for buyers
In the above scenario, once AssureClose owns the home, the buyer's surviving heirs get 120 days to purchase the home at a 10 percent discount - a $200,000 home for $180,000.
The buyer can also purchase coverage ($75 for one buyer, $100 for an additional buyer) on his or her life. If one buyer dies, the surviving buyer, through the real estate agent and coverage from Lloyd's, can proceed with the closing - at no cost to him or her.
"They can move into the home or sell it or decide what they want to do with the property. They have a place to live, if necessary, and options. This would not otherwise be the case. The whole transaction would be over and everyone would start over again and the remaining buyer would be left in whatever world they might be," said Burmeister-Laws.
Exactly who pays the premium is negotiable. The insurance agent can pay it, the buyer can pay it, and the seller can pay it. Any buyer, seller, real estate agent or attorney in the nation can purchase the coverage for their transaction through AssureClose.
"I will pay for it (for my transactions). It's an average of under $100 at closing and a small amount to pay to know the transaction will occur. I want the satisfaction of knowing I don't have to look at that eyes of someone whose house is filled with boxes with nowhere to go. I want to be able to hand that person the keys," Burmeister-Laws said.