In storm prone locations, such as Florida, homeowners needing repairs have historically come across the term AOB (assignment of benefits). According to the Florida Office of Insurance Regulation, assignment of benefits (AOB) is defined as:
“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 direct payment from the insurance company.”
An AOB scenario
So, what does that mean exactly? Picture it. A hurricane hits your area. You have roof damage. You call a roofer for an estimate. They say they will do the work for you, but you just need to sign an AOB agreement. By signing the AOB, the repair company now has the right to correspond directly with the insurance company. It completely bypasses you, the homeowner. However, the only priority is getting your roof fixed. So, rather than questioning it, or taking the time to get multiple quotes, you reluctantly agree.
After agreements are signed, the contractor completes your repair. The contractor may or may not complete the repair up to the standard you are expecting. “Some contractors might abuse that AOB by doing a poor job or an overly expensive job and then billing the insurance company an excessive amount,” explains James Lynch, chief actuary and vice president of research and education at the Insurance Information Institute.
What does this mean for me as the homeowner?
While the risks of signing an AOB can range, the most common is a repair job that isn’t up to snuff. In other words, a job that will not last as long as it should. Additionally, the AOB can contain language that gives the repair company (the 3rd party), the ability to negotiate and endorse claim payments in your name, or even file suit against the insurance company- most likely without your knowledge.
Additionally, according to the Florida Office of Insurance Regulation, “you may be responsible for the payment of additional costs if the insurance company does not pay the third party the full amount requested and a lien may be placed on your home if you fail to pay.”
Do I have to sign an AOB?
No. You are completely within your rights to file a claim directly with the insurance company. While this may take a bit more time on your part, a reputable contractor can help you navigate the process. More so, this allows you to maintain the rights and benefits of your policy as you resolve the claim.
In fact, while signing an AOB has never been required of a homeowner, new AOB legislation was recently signed by Florida Governor Ron DeSantis. The legislation, which takes effect July 1st, is a true overall. “By signing House Bill 7065, we will better protect consumers from those who would take advantage of them by abusing the Assignment of Benefits process,” Florida Insurance Commissioner David Altmaier said in a statement after DeSantis signed the bill.
In the End…
Having storm damage on your house is never an ideal experience. More so, giving someone else the ability to deal with your insurance company may seem like a way to make the experience a little less cumbersome for you, the homeowner. However, having a reputable contractor that will help you navigate that process, while allowing you to maintain all your rights as a insurance policy holder, is the most advisable course of action.
Are there any questions about AOB’s that we can help answer? We are here to help!