Different Types of Contracts and Clauses. AOB

Assignment of Benefits (AOB) is an agreement that, once signed, transfers the insurance claims rights or benefits of the policy to a third party. An AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without the involvement of the homeowner. AOBs are commonly used in homeowners insurance claims by water remediation companies and contractors.

Contract for Repair is a legal agreement for repairs that outlines the scope and cost of repairs to be completed. A Contract for Repair may state a certain amount is due up front before repairs can be started. If an initial payment is required, it will be listed on the contract and state the remaining balance is to be paid upon completion of the work. Most insurance companies will honor a contract for repair and make the check for outstanding amounts payable to the policyholder and the contractor.

Direct Payment Authorization Clause provides authorization for the direct payment of any benefits or proceeds to the company that is performing the work. This clause is found in an AOB and a Contract for Repair. Depending on the language in the AOB or the Contract for Repair, the third party may be able to endorse checks received from the insurance company on behalf of the policyholder for services provided by them. Also, the policyholder is responsible for payment of their deductible and any additional work requested by the policyholder not covered by the insurance policy.

Power of Attorney is a legal document by which one person authorizes another person to take specific actions on behalf of that person, as stated in the document.

Hold Harmless Agreement is an agreement that releases and holds a company harmless against all liability claims in the event the work is halted prior to completion.

Third Party or assignee is not an insured under the insurance contract, but stands in the shoes of the policyholder through an AOB and has the authority to file a claim with the insurance company, make repair decisions and collect insurance payments without the involvement of the homeowner.