For Florida homeowners, a flooded basement or other home insurance claim might just be the start of their troubles. Some contractors may take advantage of what’s called an assignment of benefits (AOB) agreement and leave homeowners in the lurch. Let’s look at what AOB is and how to spot a scam so you don’t get taken for a ride.
What Is an Assignment of Benefits?
An assignment of benefits is an agreement that transfers your insurance claims rights to another party. When you sign an AOB, you give someone else the authority to:
- File an insurance claim.
- Make decisions about repairs.
- Collect insurance payments.
Homeowners who are dealing with major damage may assign their benefits to the business making the repairs because it has more experience with insurance. A reputable restoration company may help the homeowner navigate the claims process. But a scammer may take advantage of the situation and commit fraud.
How Can Assignment of Benefits Be a Scam?
A disreputable business can easily abuse the assignment of benefits. Once you sign this agreement, you give up your rights as the policyholder. This may mean:
- 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.
Dishonest contractors take advantage of this set up by padding the bill and hiring an attorney to sue the insurance company when it denies the claim. Some find the system so lucrative they’ve paid plumbers up to $2,500 for every homeowner who signs an AOB. Lawsuits filed by contractors who have been assigned benefits by their clients are on the rise, according to the Tampa Bay Times – AOB claims in Florida jumped from 405 in 2006 to 28,000 in 2016. And the rate of this fraud keeps increasing.
How AOB Scams Hurt Homeowners
Assignment of benefits scams, like all insurance fraud, costs the policyholders. The rise in AOB lawsuits against insurance companies increases home insurance premiums to offset losses.
Plus, most AOB agreements permit the contractor to collect their fees from the policyholder if the insurance policy doesn’t cover the damage or the insurance provider won’t pay. If the AOB vendor tries to collect from you and you can’t pay, they can place a lien on your property for the amount owed.
Avoid an Assignment of Benefits Homeowners Insurance Scam
To avoid unscrupulous vendors, watch out for these red flags:
- Someone knocks on your door and tells you there is damage you didn’t know about.
- A contractor promises 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.
- The form looks unprofessional or has misspellings and poor grammar.
You can also avoid an assignment of benefit scam by doing the things you would normally do before signing a contract:
- Ask questions. A reputable business owner is willing to answer any question you ask.
- Read the forms. Make sure what you understand what benefits you’re signing away.
- Know your rights. You don’t need an AOB to get your claim processed or the repairs started.
Assignment of benefits is good way to cut through red tape and get your repairs done sooner, but be vigilant. Always do your due diligence before you sign away the rights to your insurance benefits.