You are being asked to sign an Assignment of Benefits (AOB). What is it and what should you know?
An Assignment of Benefits (AOB) is a contract between you and another party, typically a contractor, roofer, or even a mitigation company, giving them the right to deal directly with your insurance company and receive payment for your claim.
The “pitch” is, “I will handle everything for you Mr. Homeowner so you don’t have to interact with the insurance company at all”. Unfortunately, signing this document gives all of your rights to claim and payment thereof, away. The insurance company is no longer obligated to answer questions from you or hear your concerns because they are now obligated, by your signed authority, to deal directly with the contractor.
While most assignment of benefits are not fraudulent, fraudulent activity using this contract is on the rise. An example of fraudulent activity could be that someone knocks on your door and states there is damage to your roof and it happened from a recent storm. He further explains that he can get you a NEW roof for free – just sign this AOB agreement and it will be all taken care of!
Should the roofer or contracted third party claim more damage than there actually is, it is much easier for them to commit that fraudulent activity when dealing directly with the insurance company.
These fraudulent types of activities affect homeowners in two ways:
- The Carrier may choose to fight the assessment in the courts which substantially prolongs a resolution to the Insured’s damages.
- In the long-term, these inflated loss assessments cause carriers to increase their rates to ensure there’s enough premium to remain solvent.
Per the South Carolina Department of insurance, in the “Assignment of Benefits and What Can I Do to Avoid Insurance Fraud sections” use caution and seek advice when considering assignment of benefits, particularly after a storm or disaster.
AOB Reform Laws
Some states, like Florida, have now passed AOB Reform Laws which require AOBs to provide in the agreement, that you have the right to cancel without penalty, however, you may be obligated to pay for any contracted work he performed before the agreement is canceled.
Seek Third Party Advice
The bottom line is, signer, beware! Before you sign this type of document, seek advice from your agent or an attorney to understand exactly what’s being presented and more importantly what policyholder rights you’ll lose relative to your claim.