What is assignment of benefits in insurance?

Assignment of benefits (AOB) is a legal agreement in which you, the policyholder, transfer your insurance claim rights to a third party—usually a contractor, water remediation company, or other service provider. Once you sign an AOB, that third party can file the claim, negotiate with your insurer, and collect the insurance payout directly, without your further involvement. While AOB can be convenient, it has also been widely abused, particularly in Florida.

How AOB works

After your home is damaged, a contractor may ask you to sign an AOB before beginning repairs. By signing, you give the contractor the legal right to:

• File the insurance claim on your behalf
• Negotiate directly with your insurer over the scope and cost of repairs
• Receive the insurance payout directly
• Sue your insurer if there is a dispute over the claim amount

In theory, this simplifies the process for the homeowner. In practice, it removes you from the decision-making process and can lead to inflated claims, unnecessary litigation, and higher insurance costs for everyone.

The risks of signing an AOB

• Loss of control: Once you sign, you may have little say in what repairs are done, what is billed, or how the dispute is handled.
• Inflated costs: Some contractors use AOBs to bill far more than the repair actually costs, knowing the insurer—not you—is paying.
• Litigation: If the insurer disputes the inflated bill, the contractor sues. Legal costs ultimately drive up premiums for all policyholders.
• Balance billing: If the insurer pays less than the contractor billed, you could be responsible for the difference.

Florida's response to AOB abuse

Florida experienced widespread AOB abuse, particularly in water damage and roofing claims. In 2019, the Florida legislature passed a law (SB 122) to curb abuse by requiring contractors to provide itemized estimates, giving insurers the right to inspect damage before work begins, and limiting attorney fee awards in AOB lawsuits. Additional reforms in 2022 and 2023 further restricted one-way attorney fees and AOB-driven litigation.

What Truscott recommends

Think carefully before signing any assignment of benefits. In most cases, you are better off managing your own claim, getting multiple repair estimates, and working directly with your insurer. If a contractor pressures you to sign an AOB before even assessing the damage, consider that a red flag. A Truscott policy checkup can help you understand your claim rights and walk you through the process without giving them away. Contact us before you sign.