A legal agreement that transfers your insurance claim rights to a contractor — giving them the authority to deal directly with your carrier and collect payment on your behalf.
What an Assignment of Benefits Is
An Assignment of Benefits (AOB) is a legal document that transfers your rights under your insurance policy to a third party — typically a roofing contractor. Once signed, the contractor steps into your shoes for the purposes of the claim. They can communicate directly with your carrier, negotiate the settlement, and collect payment without your involvement in each step.
AOB agreements are common in roofing, particularly after major hail events when contractors are moving quickly through a neighborhood. They are presented as a convenience — sign here and we handle everything. That convenience is real. But so are the risks, and understanding both before you sign is essential.
How an AOB Works in a Roof Claim
Without an AOB, the claim process runs through you. Your carrier pays you, and you pay your contractor. You are the decision-maker at every stage — approving supplements, reviewing estimates, authorizing repairs.
With an AOB in place, that changes. Here is how the process typically unfolds:
- You sign the AOB — transferring your claim rights to the contractor at or before the time of signing the contract
- The contractor files and manages the claim — communicating directly with your carrier, submitting documentation, and negotiating the scope and settlement
- The carrier pays the contractor directly — you are removed from the payment chain
- You are responsible for your deductible — the AOB does not eliminate your out-of-pocket obligations under the policy
In a straightforward claim with a reputable contractor, this can work smoothly. The problems arise when the contractor’s financial interests diverge from yours — or when they disappear before the work is finished.
The Risks of Signing an AOB
AOB agreements have been associated with significant fraud and abuse in states with high storm activity — which is exactly why Colorado has moved to regulate them more tightly. Understanding the risks is not about assuming the worst of your contractor. It is about protecting yourself if things go wrong.
Loss of Control Over Your Claim
Once you sign an AOB, you surrender your direct authority over the claim. The contractor can make decisions — accepting a lower settlement, agreeing to a scope of work, or dropping a supplement — without your explicit approval for each item. Your name is on the policy, but someone else is running the claim.
Inflated Estimates and Fraud Risk
In states where AOB abuse has been well documented, a common pattern involves contractors inflating estimates to maximize the insurance payout — sometimes well beyond what the actual work costs. The contractor collects the difference. You may not even know it happened. And if the carrier investigates and finds fraud, your policy can be affected.
Disputes Between Contractor and Carrier
When a contractor and carrier disagree on scope or settlement under an AOB, you can end up in the middle of a legal dispute you didn’t initiate and have limited ability to resolve. Some AOB agreements include litigation clauses that allow contractors to sue your carrier — using your policy rights — without your ongoing consent.
Difficulty Canceling
AOB agreements vary in how and whether they can be revoked. Some include cancellation windows; others do not. Once work has begun, canceling an AOB becomes significantly more complicated. Reading the cancellation terms before signing is not optional.
Colorado’s AOB Regulations
Colorado has implemented restrictions on AOB agreements in response to fraud concerns and consumer protection issues. Key provisions affecting Colorado homeowners include:
Right to Rescind
Colorado law provides homeowners with a right to rescind certain contractor agreements — including those involving AOB provisions — within a specified period. The rescission right exists specifically to protect homeowners from high-pressure sales tactics common after storm events.
Waiver of Deductible Prohibition
Under Colorado law (C.R.S. § 10-4-110.9), a contractor cannot waive, absorb, or pay your deductible as part of an AOB or any other arrangement. If a contractor is offering to handle your deductible as part of signing an AOB, that is illegal in Colorado — and a significant red flag about how they operate.
Contractor Registration Requirements
Colorado requires roofing contractors to be registered with the state. An unregistered contractor asking you to sign an AOB has no regulatory accountability — and limited legal recourse if problems arise. Always verify registration before signing anything.
When an AOB Might Make Sense
AOB agreements are not inherently problematic. In the right circumstances, with the right contractor, they can simplify a complex claim. Situations where an AOB may be reasonable include:
- You are working with a well-established local contractor with a verified track record
- The claim is straightforward with minimal supplement potential
- You have reviewed the AOB terms carefully and understand exactly what you are transferring
- The agreement includes a clear cancellation provision
- The contractor is not offering to waive your deductible or make any other promises that sound too good
The key is informed consent — understanding what you are signing before you sign it, not discovering the implications after the fact.
What to Review Before Signing an AOB
If a contractor presents you with an AOB, take time to review these specific points before signing:
- Scope of transfer — exactly which rights are being transferred and for how long
- Cancellation terms — whether you can revoke the AOB and under what conditions
- Communication rights — whether you retain the right to be informed of all claim communications and decisions
- Litigation authority — whether the contractor can pursue legal action against your carrier using your policy rights
- Payment terms — how and when the contractor is paid, and what happens if the carrier pays less than the contractor’s estimate
- Deductible obligations — confirming your deductible responsibility is clearly stated and no waiver is implied
AOB vs. Hiring a Public Adjuster
Both AOB arrangements and public adjusters involve a third party managing aspects of your claim — but they are meaningfully different in how they operate and who they are accountable to.
- AOB contractor — a roofing contractor whose primary interest is completing the job and getting paid. Their incentives are not always perfectly aligned with maximizing your settlement or protecting your policy rights.
- Public adjuster — a licensed professional whose specific job is to advocate for your claim value. Public adjusters in Colorado are licensed by the Division of Insurance, bound by conduct standards, and legally required to act in your interest.
If you want a third party managing your claim, a licensed public adjuster provides clearer accountability than an AOB contractor — though public adjusters charge a percentage of the settlement, typically 5–15%.
Common AOB Questions
Can I sign an AOB after a claim has already started?
Yes — AOBs can be signed at any point during the claims process, not just at the beginning. However, signing one after you have already been in communication with your carrier can complicate the handoff and create gaps in the claim record. If you are considering an AOB mid-claim, review the timing carefully with your contractor.
What happens if the contractor does poor work after I sign an AOB?
Your workmanship warranty rights remain with you regardless of the AOB — the transfer of insurance claim rights does not transfer your right to hold the contractor accountable for the quality of their work. However, if the contractor has been paid directly by the carrier and disputes arise, resolving them becomes more complicated than in a standard contractor relationship.
Can my carrier refuse to honor an AOB?
In some circumstances, yes. Carriers can challenge AOBs that they believe were executed improperly, involve fraud, or conflict with policy anti-assignment provisions. Colorado law has addressed some of these scenarios, but the specifics depend on your policy language and the circumstances of the assignment.
Is signing an AOB the same as giving the contractor power of attorney?
No — an AOB transfers specific insurance claim rights, not general legal authority over your affairs. It is narrower than a power of attorney. However, within the scope of your insurance claim, the contractor gains significant authority to act on your behalf, which is why understanding exactly what is being transferred matters.
How Claim Advocacy Helps With AOB Situations
Whether you are considering signing an AOB, already have one in place, or are dealing with a dispute that arose from one — having independent expertise on your side matters.
- Pre-signing review — reviewing AOB terms before you sign to identify problematic provisions
- Contractor vetting — verifying Colorado registration, insurance, and local track record before any agreement is signed
- Claim monitoring — ensuring your interests are protected throughout the claims process regardless of who is managing communications with the carrier
- Dispute resolution — if an AOB arrangement has gone sideways, identifying the options available to protect your claim and your policy
Related Glossary Terms
- Waiver of Deductible
- Public Adjuster
- Storm Chaser
- Fly-By-Night Roofer
- Claim
- Settlement
- Roofing Contractor Registration
- Deductible
Not Sure If You Should Sign an AOB?
Before you hand over your claim rights, it is worth a quick conversation. A free inspection gives you an independent assessment of your damage — and a clearer picture of what your claim should look like before anyone asks you to sign anything.
📞 Call to discuss your claim: (719) 210-8699
📧 Email: gerald@winik.io