What is an Assignment of Benefits (AOB)?
An Assignment of Benefits (AOB) is an agreement that transfers insurance claims rights or benefits to a third party, such as a contractor. They file a claim for their services, and direct the insurance to pay them directly — without your involvement.
Once an AOB contract is signed, the contractor takes control and can submit whatever they’d like to the insurance company. You lose control of the direction of your claim once an AOB is signed. Contractors can bill insurance companies more than the going rate, and even for work that was never performed.
There are multiple risks for signing an AOB. Some of those potential pitfalls include:
You’re committed to a contractor, and if you’re not satisfied with their work, there’s not much you can do. Additionally, you can no longer comparison shop.
You and the contractor are still both bound by the terms and condition of the policy, and if the contractor violates those terms, coverage could potentially be jeopardized for your entire loss.
Even if a contractor leaves a job incomplete they can still claim compensation from the insurance company. That money gets deducted from your benefits.
You should also be wary if a contractor offers you something in exchange for nothing (like a free roof or kitchen), wants to start working immediately and advises you to delay contacting the insurance company, or offers to “take care of” your deductible. If it sounds fishy, it probably is, and any of these issues could potentially lead to a fraud investigation. That could jeopardize your coverage.
Litigation is also a possibility, as there is no standard for what a contractor can submit to an insurance company if an AOB is signed. If the insurance company has questions about what’s been submitted by the contractor, that company could potentially be sued by the contractor. If that were to occur, it’s likely you would be a witness.
For additional information regarding AOBs, please contact us at your convenience.