You just had a loss to your home, you are stressed and a vendor comes in and quotes the repair work for you and part of their contract is an “Assignment of Benefits” to sign. They say its going to make the claim easier for you and let them handle everything Do you sign it? No!!!

Assignment of benefits (AOB) abuse is the newest type of fraud and something that is costing the insurance companies a ton of money the last few years which in turn raises premiums for all. According to the Florida Office of Insurance Regulations (FLOIR) the definition of AOB is:

An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek payment directly from the policyholder’s insurance company. It will sign over the consumer’s insurance benefits to the contractor or vendor and give this third-party the ability to negotiate and endorse claim payments or file suit against the insurance company on the consumer’s behalf.

This means that the company that you hire has the same rights to your policy as you do and can do things without your knowledge or permission and it leaves you out of the claim process. This gives the contractor the right to make repair decisions and collect payments all without your involvement. Due to this you may not obtain the necessary repairs to your property and liens could be placed on your property for unpaid repairs bills. Once you sign that agreement:

  • Your insurance company will only communicate with the other party.
  • You lose the right to mediate claims.
  • You may have to pay penalties if you don’t comply with the AOB.
  • The other party can sue your insurance company.

Below is an example of what can happen with an AOB repair:

A condo owner has suffered water damage and hired a contractor to do the repairs and signed an AOB. The condo was repaired badly and the work was never fully finished. The contractor charged thousands of dollars for the incomplete work and inflated the cost of the work asking for a lot more then the work should have cost, so the insurance company denied the contractors estimates and offered a different amount. The contractor then sued the insurance company and to avoid court costs, the insurance company paid the contractor the complete amount, plus legal fees. The condo owner never received a penny of that money and had to find another contractor to complete the work, and paid out of their own pocket.

Know the Signs of AOB Abuse

Although all AOB is not fraud, fraud and abuse are on the rise. Be on the lookout for following AOB Fraud red flags and call your insurance company before signing anything!!!!!!

  • Someone knocks on your door and tells you there is damage you didn’t know about.
  • You’re promised something for nothing, such as a free roof or kitchen renovation.
  • Someone claims the damage is greater than it clearly is.
  • Permanent repairs begin before your insurance company is notified or allowed to inspect damages.