Anchor Insurance Blog

Your Guide to Assignment of Benefits (AOB)

Posted by Anchor Insurance on Aug 1, 2016 9:14:28 AM

Guide to Assignment of BenefitsWhen your home has been damaged, call your insurance company first.

Protect yourself from Assignment of Benefits (AOB) Fraud.

Consider this situation…You return home one day to find your laundry room filled with water.  Your washer hose has sprung a leak and water is everywhere. Desperate to remove the water and stop further damage, you grab your phone, run a search, and call the first water remediation company on the list. The repair company arrives with the promise to take care of everything at no cost to you. Furthermore, they explain you don’t even have to get involved with filing or handling the insurance claim. But first, you must sign an AOB agreement so they can be paid for their work.

What is an Assignment of Benefits (AOB) agreement?

An assignment of benefits is an agreement that transfers all insurance policy benefits and rights from you, the policyholder to a third party such a contractor or repair vendor after damage has occurred to your home.  It’s intended to help expedite the claims process and make things easier for the insured by letting the repair vendor work directly with the insurance company. But recently, it’s being misused for another purpose: for repair vendors to seize control of the claims process with the intention of overcharging and inflating repair costs, often while keeping the insured in the dark.

What does AOB fraud look like?

Getting back to the water leak story…after you’ve signed the agreement, the repair company is now in charge of the claims process. They control all reporting of equipment and labor costs to your insurance company and they negotiate the payment. It becomes AOB fraud if the repair company overcharges for repairs, inflates repair estimates and in some cases charges for work never completed.  In the case the laundry room water removal, the remediation company may install more fans than needed, and run them longer than necessary to inflate the repair cost by 3-4 times the normal rate.  This recently happened to one homeowner that has spoken out about it.  Read her story here.

Who pays for AOB fraud?

When the inflated repair bill exceeds what is covered by your homeowners insurance policy, you may find yourself on the hook to pay the difference. Because you have signed an AOB, you no longer have the right to dispute the actions of the repair company. To make matters worse, the repair company has the right to place liens on your property if they are not fully compensated for their work.

But it’s not only the individual homeowners that pay for AOB abuse. With AOB fraud lawsuits on the rise, up 90,000 percent since the year 2000 according to the Consumer Protection Coalition, it’s quickly becoming a driver of increased homeowner premiums across the state of Florida.

How to protect yourself from AOB fraud.

The best way to avoid becoming a victim of AOB fraud is to have a plan of action before you have a claim. Also, it’s important that you understand what your individual insurance policy will cover for emergency repairs such as water remediation. Always be cautious of a repair vendor that promises there will be no cost to you. Without knowing the terms of your individual insurance policy, the vendor cannot possibly know what coverage is provided and what costs you may or may not incur.

Important steps you should take when you have a claim:

  • Always call your insurance company first so that all damage can be properly documented. Typically your insurance carrier will be able to recommend several reputable repair vendors in your area.
  • Do not sign contracts for repair work until you have spoken to your insurance company. And do not sign anything you do not fully understand.  This helps you maintain control over the claims process.
  • If emergency repairs are needed, contact your insurance company for preapproval before repairs begin. Emergency repairs that exceed $3,000 or 1% of your dwelling value may not be approved. Be cautious of a repair vendor that promises there will be no cost to you. This vendor is not familiar with the terms of your home insurance policy.
  • Always obtain verbal or written approval from your insurance company before any permanent repairs begin. Permanent repairs that begin before your insurance company has inspected the damage may not be covered.
  • Do not let any repair vendor rush you into starting permanent repairs. Wait at least 72 hours after you have notified your insurance company of the damage before starting permanent repairs.

If you have already signed an AOB and you feel fraudulent repair activity is taking place, document it and report it immediately to your insurance company and your insurance agent. If you witness AOB fraud, or any other type of insurance fraud occurring, always report it to the Florida Property and Casualty Insurance Fraud Task Force.

Stable coverage during stormy weather.

We were formed specifically with these homeowners in mind. Our mission is to provide stable, comprehensive and affordable insurance options to people living in catastrophe-prone areas.

And we have the experience to follow through. Our team has a history of building strong, successful, multi-state property insurance companies. Combined, we have more than 100 years of insurance experience working in Florida and other storm-prone areas, successfully managing exposure to natural disasters.

You can rely on Anchor Insurance for stability when you need a little (or a lot) of help. Our swift claims response and warm customer care will provide you reassurance in unsteady times. Rest easy knowing you and your home are protected by a solid insurance company that can stand the test of time.

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Topics: Assignment of Benefits, Fraud Alerts

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