Risk to Homeowners When It Comes to Assignment of Benefits and Your Claim
Assignment of benefits (AOB) is a practice that allows homeowners to sign over their rights to an insurance claim to a third-party contractor, such as a water restoration or roofing company. While this can provide convenience for the homeowner, it also poses some significant risks. Here are some of the risks that homeowners should be aware of when considering an AOB:
Losing control of the claim: When a homeowner signs an AOB, they are essentially giving up control of their insurance claim to the third-party contractor. This means that the contractor is the one who will communicate with the insurance company, make decisions about repairs or replacements, and receive payment from the insurance company. This can be risky because the homeowner may not have the final say in important decisions related to their property.
Fraudulent activity: Unfortunately, there are some contractors who take advantage of the AOB process to commit fraud. They may inflate the cost of repairs or perform unnecessary work, knowing that the insurance company will pay for it. Homeowners may end up paying for work that wasn't necessary or wasn't done properly.
Higher costs: When a third-party contractor handles an insurance claim through an AOB, they often have more leverage to negotiate higher prices for their services. This can result in higher costs for the homeowner, which may not be covered by their insurance policy.
Legal complications: If a homeowner signs an AOB without fully understanding the terms and conditions, they may be exposing themselves to legal complications. For example, if the contractor does not complete the work as agreed or if the homeowner disagrees with the final repair bill, there may be legal disputes that arise.
Insurance premium increases: If a homeowner files a claim through an AOB and the contractor inflates the cost of repairs, the insurance company may end up paying more than they would have otherwise. This can lead to higher insurance premiums for the homeowner in the future.
In conclusion, while AOBs can be a convenient way to handle an insurance claim, they come with significant risks. Homeowners should carefully consider the potential consequences before signing an AOB and ensure that they fully understand the terms and conditions of the agreement. It is always recommended that homeowners work directly with their insurance company to handle their claims whenever possible.