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What is Assignment of Benefits in Homeowners Insurance?

You’ve probably heard of the assignment of benefits in regards to homeowners insurance, but what exactly is it, and how does it benefit you? Understanding this term is crucial to knowing how transferring your insurance claims rights can impact you and your family. Optimizing the AOB will help you make informed decisions about your insurance, and move forward with confidence. 

So, what is the assignment of benefits in homeowners insurance? Here’s what you need to know. 

What Is An Assignment Of Benefits?

An assignment of benefits, or AOB, is an agreement that gives a third party the right to claim insurance. An AOB gives the third-party the authority necessary to file claims, make repair decisions, or collect insurance payouts without you (the homeowner) having to be involved. 

AOBs have been around for years, and are commonly used for life insurance and health insurance policies. However, more and more homeowners are beginning to utilize this agreement to allow restoration companies and contractors to file claims. 

Using an AOB is a great way to help you through the process of claiming insurance, as it allows a trusted party to navigate you through the procedure without making any mistakes or filing false claims. 

For instance, if your roof collapses and causes damage, you can sign an AOB with the restoration company. This allows them to contact the insurance company and file a claim for you, which results in them being paid directly. 

What Info Should Be Included In An AOB?

Since assignment of benefits agreements affect large amounts of money, it’s important to get them done right. This means including all necessary information. All AOB agreements but have written, itemized, per-unit cost estimates for the services performed by the third-party. 

It must also contain a notification in 18-point, uppercase, boldface font that states you are relinquishing your rights to your claim to a third-party. 

It is generally a good idea to consult a legal counsel before signing an AOB. Mistakes can be costly, or cause major complications in the process. 

Legal Issues Surrounding AOB

Since AOBs are legal contracts, they are binding. However, there are a few instances which provide a way to cancel the contract.

  1. All ABOs must give you the option to rescind the contract within 14 days after its execution. This is done by submitting a written notice to the third-party to whom you relinquish your rights.
  2. The AOB must give you the ability to rescind the contract within 30 days of its execution provided the AOB does not contain an commencement date, or the third-party to whom you relinquished your right to claim has not started work on the property.
  3. An AOB must allow you to rescind the contract provided the third-party hasn’t performed any substantial work within 30 days after the commencement date.

While assignment of benefits contracts are helpful, it’s important to understand the process. If you have questions, you should consult a legal representative to help guide you through the process.

What is the Mission of RAF?

RAF’s purpose is to protect the rights and make the voices of honest, hard-working, independent contractors heard. We advocate for professionals in the mold, fire, water, and wind damage industry. If you are interested in becoming a member of RAF or have any further questions, call us today.

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