What You Need to Know Before Signing AOB
An AOB, or assignment of benefits, is a form or clause that allows contractors and repair professionals to work directly with an individual’s insurance company when work is needed. While this may take some of the burden off your plate in the short term, there are a few things you need to know before signing this type of agreement.
How Does Assignment of Benefits in Louisiana Work?
On paper, an AOB clause in insurance law allows a third party to seek payment from your insurance company for the services and repairs performed. These clauses are designed to simplify and speed up the repair process by removing the “middleman” hassles the policyholder might otherwise deal with.
With an AOB clause, an insured individual would simply drop off a vehicle that needs repairs, then pick it up once it's ready. If the repairs are being done on a home, the contractors arrive, perform the work, and leave.
The repair person or contractor is left to handle the payment request from the insurance company.
The Impact of AOBs
In a perfect world, AOBs would likely be very helpful for policyholders who are trying to get repairs completed. Unfortunately, several things can go wrong with these types of agreements, so it’s important to be aware of what you’re getting into before signing anything.
Essentially, signing an AOB removes you, the policyholder, from the equation and allows the repair person to step in as the beneficiary of benefits. While this can be an ideal scenario, there are times when no longer having any say in the matter can be undesirable.
Assignment of Benefits for Creditors Scams
Incurring a few minor charges you didn’t plan for can accompany almost any repair, but AOB scams take these small added costs and supercharge them. Instead of small surcharges, a dishonest repair shop may start an AOB scam by overcharging significantly for services and/or billing for repairs that were never done.
As a result, these inflated claims can increase the policyholder’s insurance rates if the claim is approved. If the claim is denied, however, this could leave policyholders on the hook for covering the costs of the “repairs” done.
In addition to the costs associated with being scammed, an AOB can also remove the policyholder from being involved in the repairs being done. This means that the repair person or contractor decides how the repairs are made and what materials are used.
If you’ve recently had to file an insurance claim and an AOB clause has been brought up, you may be feeling confused about your next steps. Before you sign anything, reach out to Montiel Hodge to book a consultation. One of our experienced attorneys will walk you through the next steps you should take in this matter.
