That’s all you want after you’ve experienced loss or damage to your home. You want it repaired as soon as possible. But, be sure you understand what you’re signing when the contractor asks for an “assignment of benefits.”
What is an Assignment of Benefits (AOB)?
An Assignment of Benefits is a legal document that allows a contractor to bill an insurance company directly for repairs after a covered loss. It also allows the contractor to bypass the homeowner when it comes to getting paid.
Why Would I Sign an Assignment of Benefits?
Signing an assignment of benefits may seem like a good idea because it speeds up the repair process. The contractor can get to work quickly and you don’t have to worry about paying out-of-pocket and being reimbursed by your insurance company later.
What’s the Catch?
The catch is that you are essentially handing over control of your insurance claim to the contractor.
Once you sign an AOB, the contractor will likely take charge of dealing with your insurance company. This means that if there are any issues with the repairs or billing, you may have to go through the contractor to resolve them instead of dealing with your insurer directly.
Additionally, some contractors may use high-pressure tactics to get homeowners to sign an AOB.
Even if you didn’t know what you were signing when you signed this paperwork, you’ve just assigned control of your claim to your contractor.
At this point, your insurance company will no longer be able to provide you with a claim check. Everything would go through the contractor.
This could be extremely bad because if you lose control of your claim, your house may never be repaired and therefore end up unlivable.
Dishonest contractors pressure unsuspecting homeowners into signing contracts that include these “Assignment of Benefits” (AOB) clauses. What you want to look for are phrases like, “I transfer and assign any and all insurance rights, benefits, and causes of action under my property insurance policy to the contractor” or something along those lines.
What do you stand to lose?
Now that your contractor is in control, he can bill your insurance company for work he hasn’t done, overcharge your insurer, or simply take your money and never even begin working on your home. The contractor could take the money and run, leaving your home unrepaired or partially repaired. Either way, you may be the one left to pay for your contractor’s scams.
Also, if an inflated bill from your contractor exceeds what is covered by your homeowner’s insurance policy, you may have to pay the difference. The contractor could place a lien on your home, and contractor liens in Florida can be enforced by foreclosure. This type of fraud, while extremely costly to individual homeowners who’ve fallen victim to the scam, affects all Florida homeowners.
Fraud is currently one of the primary reasons why home insurance premium costs increase.
How to prevent becoming a victim:
- Following a loss, the first call should be to your homeowner’s insurance company. They can refer a licensed, experienced, and reputable contractor. This will also help expedite your claims process.
- Never sign anything with a contractor who requires you to agree to an assignment of benefits document.
- Ask the contractor for proof of liability insurance.
- Never sign a document you don’t fully understand. When in doubt, call your homeowner’s insurance company for help.
- In the event of a family member’s home emergency, make sure to tell them not to sign anything that requires them to assign their benefits to a contractor.
What will happen if an Assignment of Benefits is not signed?
If you don’t sign anything that requires you to agree to an assignment of benefits document, the contractor can’t bill your insurance company for work he hasn’t done, overcharge your insurer, or simply take your money and never even begin working on your home.
Additionally, in the event that you need to make a claim on your homeowner’s insurance policy, you will be able to deal with your insurer directly. This means that you will have more control over the claims process and can be sure that the repairs are being made properly.
What should I do if I’ve already signed an AOB to a contractor without realizing the risks involved?
If you’ve already signed an AOB, there may not be much you can do. You may want to try to negotiate with the contractor to have the AOB removed from the contract. However, the contractor is not obligated to do so and may refuse.
If you’re unable to have the AOB removed, your best course of action is to closely monitor the contractor’s work. Make sure that you’re present when repairs are being made and that the work is being done to your satisfaction. It’s also important to keep detailed records of all communication with the contractor, as well as copies of any invoices or receipts for work that has been completed.
It is important for homeowners to be aware of the dangers of signing an Assignment of Benefits document to a contractor. This document can lead to inflated bills, loss of control over the claims process, and even foreclosure. By following some simple tips, homeowners can protect themselves from becoming a victim of contractor fraud.
