Imagine you’re juggling a million things after a storm damages your home. Between getting estimates from contractors, filing an insurance claim, and figuring out how to pay for repairs, the process feels overwhelming.
For years, many homeowners in Florida relied on Assignment of Benefits (AOB) agreements to simplify this headache. These agreements allowed contractors to handle insurance claims directly, taking some weight off homeowners’ shoulders.
But starting January 1, 2023, Florida made a major change: AOBs are no longer allowed for property insurance policies issued after this date. This new law aims to reduce fraud and bring down rising insurance costs, but it also shifts a bit more responsibility back to homeowners when filing insurance claims.
So, what exactly were AOBs, why did they go away, and what does this mean for you? Let’s break it down in plain terms so you can navigate this new landscape with confidence.
What Are Assignment of Benefits (AOBs)?
An Assignment of Benefits (AOB) is a legal agreement that allows homeowners to transfer their insurance claim rights to a third party, such as a water remediation company, contractor, or roofer. Essentially, it’s like saying, “Hey, you handle this for me.”
Here’s how it worked: Imagine your roof gets damaged in a storm. Instead of dealing with the insurance company yourself, you could sign an AOB with a roofing contractor. By signing an Assignment of Benefits, the homeowner allowed the contractor to communicate with their insurer, file the claim, and get paid directly from the insurance company.
For many homeowners, this seemed like a convenient way to avoid the back-and-forth with insurance adjusters and paperwork. On the surface, AOBs were meant to make life easier. You wouldn’t have to worry about paying upfront for repairs or handling the claims process, which could save time and stress during an already overwhelming situation. The contractor would take care of everything, and the insurance company would send payment straight to them.
But there was a catch: once you signed an AOB, you gave up control of your claim. The contractor now had the legal right to negotiate with your insurance company, decide the cost of repairs, and even sue your insurer if disputes arose. While this worked smoothly in some cases, it also opened the door to problems, which we’ll explore in the next section.
Why Are AOBs No Longer Allowed?
At first glance, AOBs seemed like a great idea—less hassle for homeowners and quicker repairs after disasters. But over time, the system became a breeding ground for fraud and abuse, leading to skyrocketing insurance premiums for Florida homeowners.
Here’s what went wrong: Some unscrupulous repair companies took advantage of AOB agreements. Once an AOB was signed by a policyholder, the contractor gained control of the claim. They would then inflate repair costs or perform unnecessary work, then demand payment from the insurance company.
If the insurer pushed back, the contractor could sue, using the homeowner’s insurance policy as leverage. These lawsuits flooded the court system, driving up costs for insurers, and ultimately for policyholders.
For example, let’s say you signed an AOB with a contractor to fix a leaky roof. Instead of just addressing the damage, the contractor might claim the entire roof needs to be replaced and bill your insurer far more than the actual cost. When the insurer refused to pay the inflated amount, the contractor could file a lawsuit in your name.
Meanwhile, you, the homeowner, might be stuck in the middle with unresolved repairs and rising premiums.
To put an end to these practices, Florida passed Senate Bill 2-A, effective January 1, 2023. This law bans AOBs for property insurance policies issued after this date, meaning contractors can no longer take over your rights to file claims or negotiate directly with your insurer.
While this change aims to reduce fraud and lower costs for everyone, it also means homeowners must now handle their insurance claims themselves—a shift that requires more involvement but promises a fairer process overall.
What Does This Mean For Future Claims?
The elimination of AOBs has brought significant changes to the way insurance claims are handled in Florida. Here’s what it means for both policyholders and contractors:
For Policyholders
Without AOBs, policyholders are responsible for managing claims and ensuring insurance payments are issued directly to the appropriate parties. This means you’ll need to:
- Take a Hands-On Approach: From reporting the damage to negotiating settlement amounts, you’ll need to be actively involved in managing your claim. This can feel overwhelming, especially during stressful times, but it also puts you in control of your repairs and insurance interactions.
- Understand Your Policy: It’s more important than ever to familiarize yourself with your policy’s terms, coverage limits, and exclusions. Knowing what’s covered can save you time and frustration during the claims process.
On the bright side, this shift helps you avoid potential conflicts of interest or inflated repair costs that sometimes occurred with AOB agreements. It also ensures you stay informed about every step of the process, which can lead to better outcomes in the long run.
For Contractors
Contractors and service providers can no longer rely on AOBs to negotiate directly with insurance companies. Instead, they must work directly with you, the policyholder, to seek payment. This means:
- Payment Responsibilities Shift: Contractors may ask for payment directly from you, leaving it up to you to coordinate reimbursement with your insurer. This could mean paying out-of-pocket initially or working closely with your insurer to ensure timely claim processing.
- Clear Communication is Key: Contractors will need to provide detailed estimates and documentation upfront to help you file your claim effectively.
While this change may create more steps for both parties, it fosters greater transparency in the claims process and reduces the risk of legal disputes or inflated costs. Contractors who focus on providing quality service and clear communication will continue to play a vital role in helping homeowners recover after a loss.
Navigating Claims Without AOBs
With AOBs no longer an option, policyholders must take a more active role in managing their insurance claims. While this may seem daunting, a few simple steps can help you navigate the process smoothly and ensure the best outcome for your situation.
1. Contact Your Insurer Immediately
As soon as damage occurs, notify your insurance company to start the claims process. Most policies require prompt reporting of losses, so don’t delay. Provide as much detail as possible about the incident and its impact on your property.
2. Obtain Multiple Repair Estimates
Don’t make a repair decision until you get estimates from at least two or three contractors. This not only helps you choose the best service for your needs but also provides your insurer with clear, reasonable costs to process your claim efficiently.
3. Document Everything
Keep thorough records of the damage, including photos and videos taken as soon as possible after the event. Save receipts for any emergency repairs or temporary fixes you’ve made and maintain a log of all communications with your insurer and contractors. These records will be crucial if any disputes arise.
4. Work with Trusted Contractors
Choose licensed, reputable contractors who have experience working with insurance claims. A trustworthy contractor will provide detailed estimates, clear communication, and quality work to help you get back on track. Ask your insurance company (or independent agent) if they have any recommendations for you.
5. Stay Organized
Managing a claim can involve multiple steps and parties. Keep all your documentation, estimates, and receipts in one place to streamline communication and follow-up with your insurer.
By taking these proactive steps, you can ensure a smoother claims process and maintain control over your repairs. While the absence of AOBs means more responsibility for homeowners, it also eliminates many of the complications and risks that came with these agreements, giving you a more transparent and efficient experience.
Staying Informed in a Changing Insurance Landscape
The elimination of Assignment of Benefits (AOBs) is part of Florida’s broader effort to reform its insurance market, reduce fraud, and ultimately lower costs for policyholders. While these changes aim to create a fairer and more transparent system, they also place more responsibility on homeowners to understand and manage their insurance claims.
As a policyholder, it’s essential to stay informed about how these updates impact your rights and responsibilities. Taking the time to review your policy, understand your coverage, and learn about the claims process can save you time and stress if a loss occurs.
If you’re feeling uncertain about what these changes mean for you or how to navigate claims without AOBs, consulting with your insurance agent is a great first step. They can explain your coverage, clarify your options, and help you prepare for the unexpected.
Have questions or need assistance? Contact Darr Schackow today for expert guidance and personalized support to ensure you’re fully equipped to protect your home and navigate Florida’s evolving insurance landscape.