Understanding What Assignment of Benefits Means for Your Claim


Here at CWI Underwriters we want to raise awareness and educate our consumers on the dangers of signing an Assignment of Benefits at the time of a claim. If a contractor promises to take care of ALL of the paperwork for your Homeowners claim, think twice and call your insurance company before you sign away your rights.

Q: What is Assignment of Benefits?

An Assignment of Benefits is an agreement or contract that transfers the right of an insurance policy to a contractor or other entity. While AOB is a legal tool that can be used appropriately, it also provides the opportunity for companies to drastically inflate the costs to repair your home. Typically, in the AOB language it allows vendors to stand in the shoes of the homeowner, take control of the claim away from the insured, and allow for abuse of the claim process by the vendor. In extreme cases it can allow the vendor to present a claim for additional benefits from the insurance company for work not performed. For example, payment associated with replacement of damaged personal belongings and additional living expense.

Hidden in the verbiage of the AOB you could be giving the contractor permission to have access to areas they normally wouldn’t have access to. Such as contacting your lienholder, requesting documents about your policy, and other personal information. Also, by signing this form you are allowing the contractor to collect your claim settlement funds directly from your insurance company. Sometimes these contractors sue the insurance companies on your behalf, and you the insured, have no clue.

Q: How do Contractors exploit AOB?

Here’s an example: A cracked water pipe floods a home. The policyholder contacts a ABC Plumbing to fix the leak, then the ABC Plumbing refers the policyholder to XYZ, a water extraction company. XYZ  then makes you feel like they are really doing you a great service and the company promises to take care of everything including billing the insurance company directly. See the possible danger? You, the insured, no longer are in communication with the insurance company without it going thru XYZ first.

The trend is that these companies/vendors then bill your insurance company 2 or 3 times the actual cost of the water mitigation. If they are not paid to their satisfaction by the insurance company the water extraction company could place a lien on the home. Here is the scariest part- contractor liens in Florida can be enforced by foreclosure. 

Q: What can policy holders do to prevent AOB fraud?

  • The FIRST thing you should is contact your insurance company. They can refer you to a qualified, licensed professional to help you mitigate damages and accurately evaluate your loss.
  • Never sign a contract you haven’t read or don’t understand.
  • Ask ALL contractors if they utilize AOB and for proof of licensing, General Liability Insurance and Workman’s Compensation Insurance

Avoid the contractor, IF:

  • Shows up unsolicited offering you something for “free”. It’s common that they waive your deductible or get you a free roof or kitchen.
  • Pressures you for a quick decision
  • Asks for referrals for your family & friends in return for referral fees

If you have any questions regarding your claim, or your Homeowners Insurance, give CWI Underwriters a call!