As a resident of Florida, you’re likely aware of the risks that hurricanes and other malignant weather pose to your home and your family. Depending on which part of the state you live in and how long you’ve lived there, it’s likely that you’ve even experienced a hurricane or two. If you’re lucky, your home has largely gone unscathed during the worst of these storms. If you aren’t so lucky, you’ve likely gone through the aggravating process of trying to work with your insurance company on getting repairs to your home addressed in a timely and thorough manner.

But what if there was a way to essentially cut out the middleman and allow the construction company doing the repairs to your home to instead work directly with your homeowner’s insurance provider? Such a setup could potentially save you a lot of time, effort, and frustration as you deal with the numerous other grievances that pile up after a major hurricane.

The possibility does exist, and it’s called an Assignment of Benefits (AOB). But as with any legal agreement, there are certain things to know about AOBs before you decide to enact one, as well as tips to remember in order to make sure the agreement serves its fully useful purpose.


What is an AOB?

An Assignment of Benefits is a legal agreement that transfers one individual’s insurance policy rights and benefits to a third party to utilize on their behalf. An AOB gives this third party the authority to file a claim as it relates to the insurance policy, make any necessary decisions pertaining to it, and then collect the insurance payments to fund those decisions directly from the insurance company. This is usually all without the involvement of the party who the policy originally belongs to.

AOBs have a long-standing history of being used with life insurance policies and health insurance policies between individuals, similar in some ways to a power of attorney or a medical proxy setup. But AOBs are now becoming commonly used specifically for homeowner’s insurance claims, especially in circumstances when the home damage is extensive enough that the repairs being done by the construction company will be extensive and ongoing.

By way of example, say your home experiences massively damaging flooding after a hurricane. You would likely first contact your insurance company yourself to inform them of the situation, but you might next call a construction company that you want to hire to make the necessary repairs. You might then decide to sign an AOB that transfers your homeowner’s insurance rights to this construction company, and they would then take over control of your claim on your behalf and be paid for their services directly by your insurance provider.

There are many benefits to signing an AOB when using your insurance policy to make repairs to your home. The best of those is naturally the ability to remove yourself as the middleman in the back-and-forth process between receiving funds from your insurance company to then pass along to the construction company so they can make repairs. However, there are also risks associated with enacting and AOB. If not set up correctly, or if misused by the assignee, it can lead to harmful consequences for you as the homeowner.


The Possible Risks of an AOB

Though an AOB can generally be helpful with navigating your claims process, there are ways it can be misused. Remember, you are signing over the rights and benefits of your insurance policy to a third party. Even though it’s only temporary and there will be certain stipulations written into your AOB contract, you still want to make sure you trust the assignee of your AOB. This is because, depending on the language used in the AOB, your insurance company may then only be permitted to communicate directly with the third party you’ve designated. The situation may even go so far as to remove all your rights to any part of the insurance claim. This includes any rights to mediate the claim, make decisions regarding the claim, and request adjustments or specifications for repairs.

Also depending on how your AOB contract is written, the third party may be able to endorse checks or make other payments on your behalf. This third party can even go so far as to file a lawsuit against your insurance company if they believe there is a need to do so. It’s not uncommon for insurance companies to diminish or refuse due coverage according to a policy, making it difficult to work with them and get the compensation for repairs you are owed. Usually, you would be the one to file a lawsuit against them in this case, but an AOB may change that, making it your construction company who is filing the lawsuit on your behalf.

You lose quite a bit of control in this kind of situation, but the construction company is still technically representative of you and your policy. So any action they take, the insurance company may interpret as a reflection of you and your opinions. And this is why it’s so important to make sure you completely understand how to adequately prepare your AOB before signing.


How to Prepare for an AOB

After a hurricane has damaged your home, it may seem too good to be true that you can simply create a document that puts the onus of decisions and legwork with your insurance company on another party. And the reality is, this line of thinking is a little too good to be true. That’s because there are certain steps you are going to want to take before signing an AOB, as well as specific considerations you’ll want to make as the AOB is created.

First, when your home suffers damage, you likely have a contractual obligation in your homeowner’s insurance policy to take the immediate necessary steps to mitigate the damage to the best of your ability and prevent any additional damage from occurring. So as long as it’s safe to do so, make sure you address any immediate concerns or repairs, such as covering your roof to prevent more water from getting in, or removing standing water as much as possible to prevent flood damage.

After this, even if you intend to enact an AOB, you want to be the first person to contact your insurance company. Do not allow a third party to initially contact the insurance company for you. You should be the one to make first contact with them, let them know what has occurred, and that you may be planning to enact an AOB in order to get the repairs to your home done.

Of course, it’s important to make sure that your homeowner’s insurance policy allows for an AOB to be used first. You’ll also want to make sure you and/or your lawyer review your policy in full so that you understand exactly what type of coverage you have in terms of making repairs to your home. That’s because you’re going to need to put together an itemized list of exactly what you authorize the construction company within your AOB to handle. And if you ask them to make a repair that isn’t covered by your policy, you could end up paying for those repairs out of your own pocket.

This is also the time to make sure you write into your AOB the specific policyholder duties that you expect your assignee to adhere to. This should always include some type of cancellation policy should you decide to change your mind about using an AOB or the specific construction company you’ve assigned. Also keep in mind that it’s not always the homeowner who suggests utilizing an AOB; your insurance provider may make the suggestion themselves, which means you will want to be extra thorough in reviewing both the AOB contract they propose, as well as the construction company they suggest for making repairs to your home.

An assignment of benefits can be an extremely useful tool during a time when you and your family have other difficulties to navigate. But it still takes time and effort to set up correctly. That’s why seeking the assistance of an experienced legal team like The Whisler Law Firm should also be one of the first things you do if you’re considering an AOB. We can also help you address issues with your assignee or insurance provider should something go wrong.

Call our office at 833-529-5677 or fill out our online form to schedule a free consultation with someone from our team today.