Assignment of Benefits (AOB)

An assignment of benefits (AOB) is an agreement in which a policyholder signs over their rights under an insurance policy — including the right to file, negotiate, and collect on a claim — to a third party performing the work. Most commonly, a property owner assigns benefits to a repair contractor, water-mitigation firm, or roofer so the vendor can bill the insurer directly and be paid without the owner acting as middleman. The assignee effectively steps into the insured's shoes for that claim, gaining the power to submit a proof of loss and even sue the carrier over disputes.

For a small-business owner, an AOB can be a convenience — you get repairs started immediately and avoid fronting cash — but it also transfers control of your claim. Once signed, the contractor, not you, negotiates the actual cash value or replacement cost settlement, and you may lose visibility into what the insurer ultimately pays. Because AOBs have driven inflated billing and litigation (notably in Florida property claims), many insurers now restrict or prohibit them via policy endorsements, and several states regulate the required disclosures and cancellation windows. Read your policy before assuming an AOB is even permitted.

A practical nuance: an AOB is different from a loss payee or a simple direction to pay. A true assignment transfers legal standing, so the assignee can enforce the policy and the insurer must deal with them — which is why disputes over emergency-services invoices so often end in the assignee suing the carrier. Before signing, verify the assignee's scope, confirm you are not waiving your right to the balance of any settlement, and check whether your state caps assignee attorney-fee recovery. When in doubt, keep control of your own claim and pay the vendor after the insurer settles.