Insurance Consumer Alert: Assignment of Benefits

Local

Written by: Press Release Posted by David Elliott
Publication date: 08/16/2022

Every year, extreme weather conditions force the Kansans to initiate the insurance claim process. Those looking to make home property damage claims will likely need to hire a contractor.

Working with a contractor can sometimes mean entering into a contractual agreement known as an assignment of benefits (AOB). Signing an AOB allows a third party individual or business to engage in the insurance claims process, make property repair decisions, and bill the insurance company directly on behalf of the policyholder. ‘insurance.

The Kansas Department of Insurance urges all Kansans before signing an AOB to check your insurance policy for any AOB restrictions, call the insurance company to see if they partner with local contractors, check credentials of a contractor by asking for references and checking reviews, and read the AOB carefully and never sign under pressure.

“While the AOB process works for some, it might not be right for you, especially if it means giving up control over how the claim is handled,” Insurance Commissioner Vicki Schmidt said. “I urge all Kansans to do their due diligence before signing an AOB contract.”

If you are working with a trusted contractor, signing an AOB leaves the insurance claim process in the hands of the contractor. Entering into this agreement removes the policyholder as an intermediary and has the potential to streamline the process.

When a contractor is given decision-making power, they must act within the limits provided by the owner’s insurance policy. Violation of the terms and conditions of the policy (wrong or not) could lead to a denial of a claim and leave the policyholder responsible for the costly accident.

Unscrupulous contractors often view AOB agreements as a blank check. They may try to do unnecessary work or charge unfair prices above the market rate. This disregard for costs could leave the policyholder financially liable for the amount not covered by insurance. Things could get worse if there is a dispute between the contractor and the insurance company. AOB agreements allow contractors to take legal action against the insurance company on behalf of the policyholder without their consent.

If Kansans have any questions or concerns regarding a Benefit Assignment Agreement, please speak to your insurance agent and/or call the Kansas Department of Insurance at 800-432-2484.

(Information courtesy of the Kansas Department of Insurance.)

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