Assignment of Benefits (AOB): Consumer Protection or Claims Litigation Risk?

An **Assignment of Benefits (AOB)** is a legal agreement that transfers the policyholder’s rights and benefits of an insurance claim to a third party, typically a contractor, roofer, or water mitigation company. While it is designed to streamline the claims process, AOBs have become a significant point of contention in property insurance.

How the AOB Process Works

The contractor asks the policyholder (the homeowner) to sign the AOB before starting repairs. Once signed, the contractor steps into the shoes of the policyholder and can communicate directly with the insurer, negotiate the claim settlement, and even file lawsuits against the insurance company without the homeowner’s consent.

Benefits for the Consumer

In theory, the **Assignment of Benefits** benefits the consumer by removing the stress of dealing with the insurer and eliminating the need for the homeowner to pay the repair costs upfront. The contractor deals with the payment process directly.

The Associated Risks (Litigation)

The downside is that it gives the contractor complete control. Insurance companies argue that AOBs have been used by unscrupulous contractors to inflate claims and file unnecessary lawsuits against the carrier, leading to increased legal costs that ultimately drive up premiums for everyone.

Policyholder Warning: If you sign an AOB, you lose all control over the claim and negotiation process. If the contractor and insurer dispute the cost, you may be pulled into the litigation, even though you transferred your rights.

Always exercise extreme caution and fully understand the implications before signing an **Assignment of Benefits**, especially during times of crisis when a contractor is urging immediate action.