Assignment of Benefits Agreement – What Is It?
If your house is damaged by a fire, non-weather-related flooding, or a natural disaster, it is best to call your insurance agent before discussing any repairs with a contractor. Many times (especially after a natural disaster), unprofessional contractors swoop in to secure as many jobs as possible. They take advantage of the chaos and immediate needs of homeowners by requiring that an Assignment of Benefits Agreement (AOB) be signed prior to starting any work.
An AOB will transfer your insurance policy rights and benefits to the contractor. They promise to handle everything related to the claim and repairs at no cost to you, the policyholder. When people are under stress from the devastation, they might think this is an easy way to help get through all the red tape.
It initially sounds good, because these unscrupulous businesses present it as a way for them to handle all the details, that they know what needs to be done, etc., so you can tend to the other issues at hand. In reality, with the contractor having total control, it is highly likely that the prices will be inflated, often surpassing the insurance policy’s coverage. Additionally, signing this form permits the vendor to collect your claim settlement funds directly from your insurance company. All without your consent or involvement in the process.
Because you signed the AOB form, you gave up the right to dispute the actions of the contractor while the contractor has the right to place a lien on your property if they are not paid in full.
The AOB was originally designed to help the policyholder by giving the vendor permission to work directly with the insurance company. However, it is now often used to control the claims process with the intent to commit fraud by keeping the homeowner out of the process.
Before hiring any company, or signing any forms, call your insurance agent for a list of vendors they recommend.