Tue Dec 3 2019
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.
Though Florida recently passed a bill aimed to curb the abuse of assignment of benefits, it’s important to recognize the potential pitfalls of signing over your claim benefits to another party.
Let’s look at what AOB abuse is so you don’t get taken for a ride.
An assignment of benefits is an agreement that transfers your insurance claims rights to another party. When you sign an AOB form, you give someone else the authority to:
Homeowners who are dealing with major damage may assign their benefits to the business making the repairs because it has more experience working with an insurance company to settle a claim. A reputable restoration company may help the homeowner navigate the claims process. But a scammer may take advantage of the situation.
A disreputable business can easily abuse an assignment of benefits. Once you sign this agreement, you give up your rights as the policyholder. This may mean:
Dishonest contractors take advantage of this situation by padding the bill and hiring an attorney to sue the insurance company when it denies the claim. Some found the system so lucrative that they 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 were on the rise, according to the Tampa Bay Times – AOB claims in Florida jumped from 405 in 2006 to 28,000 in 2016.
Florida’s new legislature caps attorney fees on AOB lawsuits, which should help deter these opportunistic practices.
Assignment of benefits abuse, like all insurance fraud, can hurt policyholders. The abundance of AOB lawsuits against insurance companies drove up home insurance premiums to offset losses. The hope is that the legislation to reform AOB practices will help bring those costs down over time.
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.
To avoid unscrupulous vendors, watch out for these red flags:
You can also avoid an assignment of benefit scam by doing the things you would normally do before signing a contract:
Assignment of benefits can be useful in some situations, but be vigilant. It’s not a small thing to sign away the rights to your insurance benefits. That’s why we offer a discount when you choose to maintain your control during the claims process.
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