The Premise of Assignment of Benefits Fraud
AOB abuse has been around a long time. In critical situations like the aftermath of a natural disaster, however, policyholders tend to be much more vulnerable.
There is an AOB provision in many homeowner insurance policies. As a result, contractors have been taking advantage of policyholders. This provision makes it possible for the insurer to assign the compensation to a third party rather than the home or business owner. Many policyholders aren’t even aware that AOB abuse is taking place because contractors include such a clause in the fine print of a property repair agreement. If the owner doesn’t read the entire document carefully, they could be transferring the insurance benefits to a contractor or a construction company.
Because the scheme has gained some prominence, AOB abuse claims have increased drastically over the past few years. The trend is quite widespread in states like Florida that suffer numerous hurricanes, leading to a large number of homeowner insurance claims.
Usually, scammers approach home and business owners in an area that has been hit by a natural disaster. They tell the policyholder that they are able to handle the entire AOB process (many people are still unaware of what AOB is). The property owner will simply be left with paying the deductible.
Once the rights are transferred to a third party, the contractor gains the right to negotiate the settlement and claim the final compensation. Very often, AOB abuse will also be linked to inflated claims. If the claim is denied or not paid in full, the contractors will often end up suing an insurance company.
Homeowners experience losses through AOB abuse in two distinctive ways. For a start, a contractor can take the money and refrain from doing any work on the damaged property. In addition, assignment of benefits fraud has also contributed to a recent increase in the cost of insurance.
Protecting Yourself from Abuse
The assignment of benefits provision is there for added convenience, but if you want to transfer your rights to somebody else, you will have to be careful about it.
It’s typically a good idea to handle the insurance claim on your own. As the property owner, you have leverage to negotiate and to even take an insurer to court. By giving up your rights, you are becoming 100 percent dependent on a third party. Unfortunately, this third party doesn’t always have your best interest in mind.
To protect yourself from AOB fraud, you will need to do a number of important things in the aftermath of the California wildfires:
- Choose contractors carefully: taking some time to do research and identify the right contractor is very important – the outcome of the property restoration will be dependent on their experience and skills. While you may want to begin the renovation immediately, doing the preliminary work can save you a lot of time and money in the long run. If you already have a reputable contractor that you work with, this may be the professional or the company to contact in the aftermath of the wildfire devastation.
- Don’t trust contractors who approach you: scammers are typically on the go and they’re the ones to contact home and business owners in the aftermath of a natural disaster. Some individuals may see this as a convenience, but such conveniences may come at a high price.
- Acquaint yourself with what AOB is: the contractors who approach policyholders and tell them that an AOB agreement has to be signed are usually relying on the fact that people aren’t fully-informed about their policies. Read through the insurance documents you have to get a better idea about what a contractor is talking about. If you understand the basic terminology and the consequences your decisions entail, you’ll be less likely to become the victim of an insurance scam.
- Do not sign any documents without contacting your insurer first: if you are in doubt, call your insurer or an experienced insurance attorney. Tell them about the document you’re being asked to sign. You will get a detailed explanation of the implications and whether this is a good idea.
- Understand the warning signs: a few red flags are easy to spot, and they’ll help you prevent fraud. The first and the most obvious one is being contacted by a contractor that you haven’t called. Additionally, such individuals are likely to promise you something for nothing after the assignment of benefits (a free roof renovation, for example). Scammers will claim that the property damage is a lot costlier than it appears to be and they may even promise to cover your deductible.
- Talk to another contractor: when in doubt, get a second opinion. Talking to another contractor and getting an estimate from them will make it easier for you to determine whether you’ve been given an inflated cost projection.
- Get preapproval for emergency repairs: emergency repairs may be required to prevent further damage. Before agreeing to such fixes, call the insurance company and get a preapproval. In some instances, costlier emergency repairs may not be covered by the insurance company. Don’t rush, even if the situation has to be addressed quickly. You may regret the decision later on.