Assignment of Benefits: Pros and Cons

What Is Assignment of Benefits (AOB)?

Assignment of Benefits (AOB) is a legal agreement that transfers your insurance claim rights to a third party—usually a contractor. Once signed, the contractor can:

• File the claim on your behalf
• Communicate directly with your insurer
• Receive payment directly from the insurer
• Sue the insurer if there's a dispute

Potential Benefits of AOB

Less Work for You

• Contractor handles paperwork and negotiations
• No need to coordinate between insurer and contractor
• Potentially faster repairs

Contractor Advocacy

• Contractor has financial incentive to maximize claim
• May catch damage you would miss
• Professional documentation of damage

Potential Risks of AOB

Loss of Control

• You no longer control the claim process
• Changes to scope of work may happen without your approval
• You may be liable for amounts beyond what insurance pays

Inflated Pricing

• Some contractors inflate prices knowing insurance is paying
• This can lead to claim denials or litigation
• You may be caught in the middle

Legal Complications

• Contractor may sue your insurer, affecting your relationship
• Lawsuits can delay repairs
• You may be called as a witness

States With AOB Restrictions

Due to abuse, some states have restricted AOB:

• Florida (2019 reforms)
• Louisiana
• Tennessee

Check your state's laws before signing any AOB agreement.

Alternatives to AOB

• Work directly with your insurer and choose your own contractor
• Get multiple estimates to ensure fair pricing
• Use a public adjuster if you need professional help
• Keep contractor and claim separate - pay contractor after receiving insurance funds

Key Takeaways

• AOB transfers your claim rights to a contractor
• It can simplify the process but comes with risks
• Read any agreement carefully before signing
• Consider alternatives that keep you in control of your claim