Assignment of Benefits (AOB): What Every Restorer Needs to Know

For restoration contractors, navigating the insurance claims process can be one of the most frustrating parts of the job. Payment delays, disputes, and complicated communication chains can leave you feeling stuck between the homeowner and the insurer. In a recent conversation with Josh Ehmke, Co-Founder and General Counsel of One Claim Solution (OCS), we dug into the details of Assignment of Benefits (AOB)—a tool designed to simplify this process.

Josh, who works exclusively with restoration contractors, shared how AOB can cut through the red tape, help you secure payment more efficiently, and ensure you stay in control of your projects. If you’ve been hesitant to use AOB or want to make sure you’re doing it the right way, this article lays out what you need to know.

What Is Assignment of Benefits (AOB)?

Assignment of Benefits (AOB) is a legal agreement where a homeowner assigns specific rights under their insurance policy to a contractor after a qualifying loss. These rights allow the contractor to deal directly with the insurance company for payment, bypassing the homeowner as a middleman.

Josh emphasized that AOB is not a transfer of the entire insurance policy. It’s limited to the work performed under the contractor’s scope. This distinction is key to understanding why AOB is such a valuable tool for restorers working with different emergency services jobs.

AOB is most commonly used for time-sensitive services like water mitigation, mold remediation, and fire damage cleanup. These situations require quick action, and AOB enables contractors to start work immediately without waiting for payment from the homeowner.

Why Is AOB Important for Restoration Contractors?

1. Faster Payments

Without AOB, contractors often rely on homeowners to negotiate with insurers. This can lead to delays or unpaid balances. AOB allows contractors to handle payment directly with the insurer, speeding up the process.

2. Reduced Financial Risk

Many homeowners don’t have the funds to pay for emergency services upfront. AOB ensures that contractors can begin work immediately without worrying about upfront payments.

3. Simplified Claims Management

AOB reduces the number of parties involved in the claims process. Instead of chasing homeowners for updates or payments, contractors can focus on negotiating with insurers and completing the job.

Common Misconceptions About AOB

Josh addressed several misconceptions about AOB during our conversation. Here are three of the most common:

Misconception 1: AOB Is a Policy Transfer

Insurers sometimes argue that AOB transfers the entire policy to the contractor, but this is incorrect. AOB only grants the contractor rights tied to the specific work performed, not ownership of the policy itself.

Misconception 2: AOB Complicates the Process

Far from adding complexity, AOB simplifies claims management. It removes homeowners from billing negotiations, streamlining communication between contractors and insurers.

Misconception 3: AOB Is Risky for Contractors

While poorly written AOB agreements can create problems, a clear and specific contract eliminates most risks. Contractors who follow best practices can use AOB confidently and effectively.

Best Practices for Using AOB

Here are several strategies for making AOB work effectively:

1. Draft Clear and Specific Contracts

An AOB agreement should clearly define:

• The scope of work covered.
• The rights being assigned.
• Payment terms and responsibilities.

2. Educate Homeowners

Homeowners are often unfamiliar with AOB. Take the time to explain what it is, how it works, and what it covers. This transparency builds trust and reduces misunderstandings.

3. Stay Legally Compliant

Contractors should avoid acting as public adjusters unless licensed to do so. Focus on your role as a contractor and let licensed professionals handle policy interpretations or disputes.

4. Keep Updated on State Regulations

Some states have specific rules governing AOB. Staying informed about these regulations ensures your agreements are legally compliant.

Challenges and How to Overcome Them

1. Insurer Pushback

Some insurers may challenge the validity of an AOB. A well-written agreement, backed by case law, is your best defense against these disputes.

2. Homeowner Confusion

Miscommunication can lead to mistrust. Be upfront about what the AOB covers and what costs might fall outside its scope.

3. Legal Changes

AOB-related regulations are evolving in many states. Partnering with a legal expert who understands the restoration industry can help you navigate these changes.

Learn more: 7 Strategies for Dealing with Insurance Adjuster Pushbacks on Estimates

In Summary

Josh pointed out that AOB wasn’t widely used in property restoration before 2016, even though it was common in medical billing. Since then, it has become a game-changer for contractors handling emergency services. By taking control of the claims process, contractors can ensure faster payments, fewer disputes, and smoother workflows.

READ MORE:

Get Paid in a Flash: How Restoration Contractors Can Improve Cash Flow