At Lighthouse, our number one goal is making sure you and your family are protected, and that means knowing your rights. Learn what an Assignment of Benefits (AOB) is and how to protect yourself from AOB abuse.
What is an Assignment of Benefits?
An Assignment of Benefits (AOB) is a document or contract that allows a third party, other than the policyholder, to recover costs from a claim. It essentially transfers the rights to the contractor to be able to bill the insurance company. This action eliminates what would be a back-and-forth process between a policyholder and their insurance company. You might be familiar with this concept because doctors’ offices use the same document to bill health insurance companies.
Assignment of Benefit Abuse
Unfortunately, there is a rise in AOB abuse. When there is a loss associated with property, a contractor is called to perform an estimate and repair the damages. After the AOB document is signed, the contractor should contact the insurance company with the estimate, have an adjuster examine the property, and then make any necessary repairs. However, contractors looking to exploit the system can provide overstated estimates to the insurance company and start “repairing” the home before an adjuster can properly examine the property. Insurance companies end up paying exponentially more than what would have been required to make the repairs. This leaves the policyholder paying more out of pocket, increasing every policyholders’ premium, and possibly leaving incomplete repairs to the home.
How to Prevent AOB Fraud
Do research before hiring any contractor. The most frequent AOB abusers are roofers and water extraction companies. Insurance providers will have a list of qualified, licensed professionals to choose from. If you choose to hire a contractor not on the insurance company’s provided list, read the contract completely. If you don’t understand it, don’t sign it. Before hiring anyone, ask if they have an AOB clause and liability coverage.
No matter the damage, always contact your insurance company immediately, and follow their claims process.