Assignment of benefits is a legal contract between you and a third party, such as a roofer, contractor, or other vendors. The AOB allows you to transfer specific rights that your insurance policy grants you to a third party. These rights can include filing a claim, financial payments to a contractor, and even allowing the third party to file a lawsuit on your behalf!
While there are reputable entities that use this form, AOBs have often been abused and broadly written. In some cases, they can give away all of your rights under your insurance policy to a third party. Unethical contractors commonly use AOBs to inflate damages and the cost of a claim, which results in legal battles and increased insurance premiums.
How To Avoid an Assignment of Benefits
Assignment of benefits (AOB) is commonly used when a homeowner experiences roof damage, a leaky pipe, etc., and they contact a contractor for assistance. The contractor may take this time to present the homeowner with an AOB. Most Assignment of Benefits agreements presented to the homeowner allows the contractor to stand in the homeowner’s shoes for insurance payment purposes.
What To Look Out For?
If the contractor hands you a form that reads, “I transfer and assign all insurance rights, benefits, and causes of action under my property insurance policy to the contractor.” They are asking you to sign away your rights to the claim under your homeowner’s insurance policy, and you don’t want that! If you experience a loss, be sure to contact your insurance company first before doing anything else. This will help protect yourself and avoid dealing with an AOB issue altogether.
Here are some red flags to look out for:
- Someone knocks on your door to tell you about damage to your home that you had no idea about
- Someone says you will get a free kitchen or free roof for no particular reason
- They claim the damage is a lot more than it clearly is
- Permanent repairs start before your insurance company is allowed to inspect or be notified
- They claim to cover your deductible
If something sounds too good to be true, it probably is. Don’t be a victim of AOB. Contact your agent if you have any questions or concerns.