It’s a scene that has been portrayed countless times in movies and on television. A desperate individual in a rush, usually due to an emergency or stressful circumstance, is persuaded into signing a document by the promise of a quick fix to their problem. As the story unfolds, the individual is shocked as the unforeseen consequences of the hastily signed document come to pass. This enduring Hollywood plotline has become a harsh reality for numerous Florida home insurance customers who have signed a document that includes Assignment of Benefits (AOB) language following a household emergency. To prevent becoming the next unwitting star of an AOB drama, please learn how you can protect yourself and your family.

How Assignment of Benefits Starts

Following a pipe leak or other household accident, your first instinct might be to call the proper contractor to help you get your home back to normal – fast! The contractor is ready to start working, but before he begins repairs he asks you to sign some “standard documentation.” He might say something like “I can’t begin working until these documents are signed.” He might even offer to help relieve you of the “burden” or “headache” associated with dealing with your home insurance company. Wanting to resolve the problem as quickly as possible, you sign the paperwork, unaware that it’s an assignment of benefits document or a contract that includes an assignment of benefits clause.

Important fact: You should always call your Florida homeowners insurance company first to ensure that your loss is properly documented and maintain control of the process.

What Does Assignment of Benefits Mean?

So what exactly did you just agree to? By assigning your benefits (claims proceeds) to your contractor, you’ve just signed over all rights to your claim. The contractor is now in total control of reporting the amount of loss to your insurance company and negotiating the payment. You, the homeowner, are no longer in control of your insurance claim.

The Issue

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 proceeds and never even begin working on your home. Either way, you can on the hook to pay for your contractor’s scams.

The Consequences

If the inflated bill exceeds what is covered by your homeowners insurance policy, you’re on the hook to pay the difference. The contractor could place a lien on the 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 drivers in home insurance premium costs. AOB fraud is far from a victimless crime!

Good to know: Although AOB scams are often associated with water extraction claims, unscrupulous roofing contractors are a growing source of AOB fraud.   

How to Prevent Yourself From Becoming a Victim

• Following water damage or a home emergency, 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. Download a resource guide for hiring a home contractor.

• Never partner with a contractor who requires you to sign 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 homeowners 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.

Related Post: Beware of Assignment of Benefits on Your Home Insurance Claim

Also: Get a Florida home insurance quote to make sure you have the coverage you need.