define what is assignment of benefits

Assignment of Benefits: What It Is, and How It Can Affect your Property Insurance Claim

Table of Contents

What is an Assignment of Benefits?

In the context of insured property claims, an assignment of benefits (AOB) is an agreement between you and a contractor in which you give the contractor your right to insurance payments for a specific scope of work .  In exchange, the contractor agrees that it will not seek payment from you for that scope of work, except for the amount of any applicable deductible.  In other words, you give part of your insurance claim to your contractor, and your contractor agrees not to collect from you for part of its work.

The most important thing to know about an assignment of benefits is that it puts your contractor in control your claim , at least for their scope of work.  Losing that control can significantly affect the direction and outcome of your claim, so you should fully understand the implications of an AOB (sometimes called an assignment of claims or AOC) before signing one.

How Does an Assignment of Benefits Work in Practice? 

Let’s say you’re an insured homeowner, and Hurricane Ian significantly damaged your roof.  Let’s also assume your homeowner’s policy covers that damage.  A roofer, after inspecting your roof and reviewing your insurance policy, might conclude that your insurer is probably going to pay for a roof replacement under your insurance policy.  The only problem is that it’s early in the recovery process, and your insurer hasn’t yet stated whether it will pay for the roof replacement proposed by your contractor. So if you want your roof replaced now, you would ordinarily agree to pay your roofer for the replacement, and wait in hopes that your insurer reimburses you for the work.  This means that if your insurance company refuses to pay or drags out payment, you’re on the hook to your roofer for the cost of the replacement.

As an alternative to agreeing to pay your roofer for the full cost of the work, you could sign an assignment of benefits for the roof replacement.  In this scenario, your roofer owns the part of your insurance claim that pertains to the roof replacement.  You might have to pay your roofer for the amount of your deductible, but you probably don’t have to pay them for the rest of the cost of the work.  And if your insurance company refuses to pay or drags out payment for the roof replacement, it’s your roofer, and not you, who would be on the hook for that shortfall.

So should you sign an AOB?  Not necessarily.  Read below to understand the pros and cons of an assignment of benefits.

Are There any Downsides to Signing an Assignment of Benefits?

Yes.  

You lose control of your claim . This is the most important factor to understand when considering whether to sign an AOB.  An AOB is a formal assignment of your legal rights to payment under your insurance contract.  Unless you’re able to cancel the AOB, your contractor will have full control over your claim as it relates to their work. 

To explain why that control could matter, let’s go back to the roof replacement example.  When you signed the AOB, the scope of work you agreed on was to replace the roof.  But you’re not a roofing expert, so you don’t know whether the costs charged or the materials used by the roofer in its statement of work are industry appropriate or not.  In most cases, they probably are appropriate, and there’s no problem.  But if they’re not – if, for instance, the roofer’s prices are unreasonably high – then the insurer may not approve coverage for the replacement.  At that point, the roofer could lower its prices so the insurer approves the work, but it doesn’t have to, because it controls the claim .  Instead it could hold up work and threaten to sue your insurer unless it approves the work at the originally proposed price.  Now the entire project is insnared in litigation, leaving you in a tough spot with your insurer for your other claims and, most importantly, with an old leaky roof.

Misunderstanding the Scope of Work.   Another issue that can arise is that you don’t understand the scope of the assignment of benefits.  Contractor estimates and scopes of work are often highly technical documents that can be long on detail but short on clarity.  Contractors are experts at reading and writing them.  You are not.  That difference matters because the extent of your assignment of benefits is based on that technical, difficult-to-understand scope of work.  This can lead to situations where your understanding of what you’re authorizing the contractor to do is very different from what you’ve actually authorized in the AOB agreement.

In many cases, it’s not necessary .   Many contractors will work with you and your insurer to provide a detailed estimate of their work, and will not begin that work until your insurer has approved coverage for it.  This arrangement significantly reduces the risk of you being on the hook for uninsured repairs, without creating any of the potential problems that can occur when you give away your rights to your claim.

Do I have to sign an Assignment of Benefits?

No.  You are absolutely not required to sign an AOB if you do not want to. 

Are There any Benefits to Signing an Assignment of Benefits?

Potentially, but only if you’ve fully vetted your contractor and your claim involves complicated and technical construction issues that you don’t want to deal with. 

First, you must do your homework to fully vet your contractor!  Do not just take their word for it or be duped by slick ads.  Read reviews, understand their certificate of insurance, know where they’re located, and, if possible, ask for and talk to references.  If you’ve determined that the contractor is highly competent at the work they do, is fully insured, and has a good reputation with customers, then that reduces the risk that they’ll abuse their rights to your claim.

Second, if your claim involves complicated reconstruction issues, a reputable contractor may be well equipped to handle the claim and move it forward.  If you don’t want to deal with the hassle of handling a complicated claim like this, and you know you have a good contractor, one way to get rid of that hassle is an AOB.

Another way to get rid of the hassle is to try Claimly, the all-in-one claims handling tool that get you results but keeps you in control of your claim.  

Can my insurance policy restrict the use of AOBs?

Yes, it’s possible that your Florida insurance policy restricts the use of AOBs, but only if all of the following criteria are met:

• When you selected your coverage, your insurer offered you a different policy with the same coverage, only it did not restrict the right to sign an AOB.
• Your insurer made the restricted policy available at a lower cost than the unrestricted policy.
• If the policy completely prohibits AOBs, then it was made available at a lower cost than any policy partially prohibiting AOBs.
• The policy includes on its face the following notice in 18-point uppercase and boldfaced type:

THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7153 OF THE FLORIDA STATUTES.

627.7153. 

Pro Tip : If you have an electronic copy of your complete insurance policy (not just the declaration page), then search for “policy does not allow the unrestricted assignment” or another phrase from the required language above to see if your policy restricts an AOB.  If your policy doesn’t contain this required language, it probably doesn’t restrict AOBs.

Do I have any rights or protections concerning Assignments of Benefits?

Yes, you do.  Florida recently enacted laws that protect consumers when dealing with an AOB.

Protections in the AOB Contract

To be enforceable, a Assignments of Benefits must meet all of the following requirements:

• Be in writing and executed by and between you and the contractor.
• Contain a provision that allows you to cancel the assignment agreement without a penalty or fee by submitting a written notice of cancellation signed by the you to the assignee:
• at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or
• at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.
• Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier.
• Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee .
• Relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.
• Contain the following notice in 18-point uppercase and boldfaced type:

YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, AT LEAST 30 DAYS AFTER THE DATE WORK ON THE PROPERTY IS SCHEDULED TO COMMENCE IF THE ASSIGNEE HAS NOT SUBSTANTIALLY PERFORMED, OR AT LEAST 30 DAYS AFTER THE EXECUTION OF THE AGREEMENT IF THE AGREEMENT DOES NOT CONTAIN A COMMENCEMENT DATE AND THE ASSIGNEE HAS NOT BEGUN SUBSTANTIAL WORK ON THE PROPERTY. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.

• Contain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.

Contractor Duties

Under Florida law, a contractor (or anyone else) receiving rights to a claim under an AOB:

• Must provide you with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required.
• Must perform the work in accordance with accepted industry standards.
• May not seek payment from you exceeding the applicable deductible under the policy unless asked the contractor to perform additional work at the your own expense.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement.
• Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy.
• If the contractor is making emergency repairs, the assignment of benefits cannot exceed the greater of $3,000 or 1% of your Coverage A limit.

Recommended Posts

The brelly guide to public adjusting in georgia, florida’s 2023 legislative session: more big changes to insurance claim laws, how long does an insurance claim take in florida seven key deadlines..

Brelly’s tools and resources are your secret weapon to getting your insurance claim filed right, moving fast, and paid fully .

• Construction Accidents

Practice Areas

Assignment of benefits: what you need to know.

• August 17, 2022
• Steven Schwartzapfel

Insurance can be useful, but dealing with the back-and-forth between insurance companies and contractors, medical specialists, and others can be a time-consuming and ultimately unpleasant experience. You want your medical bills to be paid without having to act as a middleman between your healthcare provider and your insurer.

However, there’s a way you can streamline this process. With an assignment of benefits, you can designate your healthcare provider or any other insurance payout recipient as the go-to party for insurance claims. While this can be convenient, there are certain risks to keep in mind as well.

Below, we’ll explore what an assignment of insurance benefits is (as well as other forms of remediation), how it works, and when you should employ it. For more information, or to learn whether you may have a claim against an insurer, contact Schwartzapfel Lawyers now at 1-516-342-2200 .

What Is an Assignment of Benefits?

An assignment of benefits (AOB) is a legal process through which an insured individual or party signs paperwork that designates another party like a contractor, company, or healthcare provider as their insurance claimant .

Suppose you’re injured in a car accident and need to file a claim with your health insurance company for medical bills and related costs. However, you also need plenty of time to recover. The thought of constantly negotiating between your insurance company, your healthcare provider, and anyone else seems draining and unwelcome.

With an assignment of benefits, you can designate your healthcare provider as your insurance claimant. Then, your healthcare provider can request insurance payouts from your healthcare insurance provider directly.

Through this system, the health insurance provider directly pays your physician or hospital rather than paying you. This means you don’t have to pay your healthcare provider. It’s a streamlined, straightforward way to make sure insurance money gets where it needs to go. It also saves you time and prevents you from having to think about insurance payments unless absolutely necessary.

What Does an Assignment of Benefits Mean?

An AOB means that you designate another party as your insurance claimant. In the above example, that’s your healthcare provider, which could be a physician, hospital, or other organization.

With the assignment of insurance coverage, that healthcare provider can then make a claim for insurance payments directly to your insurance company. The insurance company then pays your healthcare provider directly, and you’re removed as the middleman.

As a bonus, this system sometimes cuts down on your overall costs by eliminating certain service fees. Since there’s only one transaction — the transaction between your healthcare provider and your health insurer — there’s only one set of service fees to contend with. You don’t have to deal with two sets of service fees from first receiving money from your insurance provider, then sending that money to your healthcare provider.

Ultimately, the point of an assignment of benefits is to make things easier for you, your insurer, and anyone else involved in the process.

What Types of Insurance Qualify for an Assignment of Benefits?

Most types of commonly held insurance can work with an assignment of benefits. These insurance types include car insurance, healthcare insurance, homeowners insurance, property insurance, and more.

Note that not all insurance companies allow you to use an assignment of benefits. For an assignment of benefits to work, the potential insurance claimant and the insurance company in question must each sign the paperwork and agree to the arrangement. This prevents fraud (to some extent) and ensures that every party goes into the arrangement with clear expectations.

If your insurance company does not accept assignments of benefits, you’ll have to take care of insurance payments the traditional way. There are many reasons why an insurance company may not accept an assignment of benefits.

To speak with a Schwartzapfel Lawyers expert about this directly, call 1-516-342-2200 for a free consultation today. It will be our privilege to assist you with all your legal questions, needs, and recovery efforts.

Who Uses Assignments of Benefits?

Many providers, services, and contractors use assignments of benefits. It’s often in their interests to accept an assignment of benefits since they can get paid for their work more quickly and make critical decisions without having to consult the insurance policyholder first.

Imagine a circumstance in which a homeowner wants a contractor to add a new room to their property. The contractor knows that the scale of the project could increase or shrink depending on the specifics of the job, the weather, and other factors.

If the homeowner uses an assignment of benefits to give the contractor rights to make insurance claims for the project, that contractor can then:

• Bill the insurer directly for their work. This is beneficial since it ensures that the contractor’s employees get paid promptly and they can purchase the supplies they need.
• Make important decisions to ensure that the project completes on time. For example, a contract can authorize another insurance claim for extra supplies without consulting with the homeowner beforehand, saving time and potentially money in the process.

Practically any company or organization that receives payments from insurance companies may choose to take advantage of an assignment of benefits with you. Example companies and providers include:

• Ambulance services
• Drug and biological companies
• Lab diagnostic services
• Hospitals and medical centers like clinics
• Certified medical professionals such as nurse anesthetists, nurse midwives, clinical psychologists, and others
• Ambulatory surgical center services
• Permanent repair and improvement contractors like carpenters, plumbers, roofers, restoration companies, and others
• Auto repair shops and mechanic organizations

Advantages of Using an Assignment of Benefits

An assignment of benefits can be an advantageous contract to employ, especially if you believe that you’ll need to pay a contractor, healthcare provider, and/or other organization via insurance payouts regularly for the near future.

These benefits include but are not limited to:

• Save time for yourself. Again, imagine a circumstance in which you are hospitalized and have to pay your healthcare provider through your health insurance payouts. If you use an assignment of benefits, you don’t have to make the payments personally or oversee the insurance payouts. Instead, you can focus on resting and recovering.
• Possibly save yourself money in the long run. As noted above, an assignment of benefits can help you circumvent some service fees by limiting the number of transactions or money transfers required to ensure everyone is paid on time.
• Increased peace of mind. Many people don’t like having to constantly think about insurance payouts, contacting their insurance company, or negotiating between insurers and contractors/providers. With an assignment of benefits, you can let your insurance company and a contractor or provider work things out between them, though this can lead to applications later down the road.

Because of these benefits, many recovering individuals, car accident victims, homeowners, and others utilize AOB agreements from time to time.

Risks of Using an Assignment of Benefits

Worth mentioning, too, is that an assignment of benefits does carry certain risks you should be aware of before presenting this contract to your insurance company or a contractor or provider. Remember, an assignment of benefits is a legally binding contract unless it is otherwise dissolved (which is technically possible).

The risks of using an assignment of benefits include:

• You give billing control to your healthcare provider, contractor, or another party. This allows them to bill your insurance company for charges that you might not find necessary. For example, a home improvement contractor might bill a homeowner’s insurance company for an unnecessary material or improvement. The homeowner only finds out after the fact and after all the money has been paid, resulting in a higher premium for their insurance policy or more fees than they expected.
• You allow a contractor or service provider to sue your insurance company if the insurer does not want to pay for a certain service or bill. This can happen if the insurance company and contractor or service provider disagree on one or another billable item. Then, you may be dragged into litigation or arbitration you did not agree to in the first place.
• You may lose track of what your insurance company pays for various services . As such, you could be surprised if your health insurance or other insurance premiums and deductibles increase suddenly.

Given these disadvantages, it’s still wise to keep track of insurance payments even if you choose to use an assignment of benefits. For example, you might request that your insurance company keep you up to date on all billable items a contractor or service provider charges for the duration of your treatment or project.

For more on this and related topic, call Schwartzapfel Lawyers now at 1-516-342-2200 .

How To Make Sure an Assignment of Benefits Is Safe

Even though AOBs do carry potential disadvantages, there are ways to make sure that your chosen contract is safe and legally airtight. First, it’s generally a wise idea to contact knowledgeable legal representatives so they can look over your paperwork and ensure that any given assignment of benefits doesn’t contain any loopholes that could be exploited by a service provider or contractor.

The right lawyer can also make sure that an assignment of benefits is legally binding for your insurance provider. To make sure an assignment of benefits is safe, you should perform the following steps:

• Always check for reviews and references before hiring a contractor or service provider, especially if you plan to use an AOB ahead of time. For example, you should stay away if a contractor has a reputation for abusing insurance claims.
• Always get several estimates for work, repairs, or bills. Then, you can compare the estimated bills and see whether one contractor or service provider is likely to be honest about their charges.
• Get all estimates, payment schedules, and project schedules in writing so you can refer back to them later on.
• Don’t let a service provider or contractor pressure you into hiring them for any reason . If they seem overly excited about getting started, they could be trying to rush things along or get you to sign an AOB so that they can start issuing charges to your insurance company.
• Read your assignment of benefits contract fully. Make sure that there aren’t any legal loopholes that a contractor or service provider can take advantage of. An experienced lawyer can help you draft and sign a beneficial AOB contract.

Can You Sue a Party for Abusing an Assignment of Benefits?

Sometimes. If you believe your assignment of benefits is being abused by a contractor or service provider, you may be able to sue them for breaching your contract or even AOB fraud. However, successfully suing for insurance fraud of any kind is often difficult.

Also, you should remember that a contractor or service provider can sue your insurance company if the insurance carrier decides not to pay them. For example, if your insurer decides that a service provider is engaging in billing scams and no longer wishes to make payouts, this could put you in legal hot water.

If you’re not sure whether you have grounds for a lawsuit, contact Schwartzapfel Lawyers today at 1-516-342-2200 . At no charge, we’ll examine the details of your case and provide you with a consultation. Don’t wait. Call now!

Assignment of Benefits FAQs

Which states allow assignments of benefits.

Every state allows you to offer an assignment of benefits to a contractor and/or insurance company. That means, whether you live in New York, Florida, Arizona, California, or some other state, you can rest assured that AOBs are viable tools to streamline the insurance payout process.

Can You Revoke an Assignment of Benefits?

Yes. There may come a time when you need to revoke an assignment of benefits. This may be because you no longer want the provider or contractor to have control over your insurance claims, or because you want to switch providers/contractors.

To revoke an assignment of benefits agreement, you must notify the assignee (i.e., the new insurance claimant). A legally solid assignment of benefits contract should also include terms and rules for this decision. Once more, it’s usually a wise idea to have an experienced lawyer look over an assignment of benefits contract to make sure you don’t miss these by accident.

Contact Schwartzapfel Lawyers Today

An assignment of benefits is an invaluable tool when you need to streamline the insurance claims process. For example, you can designate your healthcare provider as your primary claimant with an assignment of benefits, allowing them to charge your insurance company directly for healthcare costs.

However, there are also risks associated with an assignment of benefits. If you believe a contractor or healthcare provider is charging your insurance company unfairly, you may need legal representatives. Schwartzapfel Lawyers can help.

As knowledgeable New York attorneys who are well-versed in New York insurance law, we’re ready to assist with any and all litigation needs. For a free case evaluation and consultation, contact Schwartzapfel Lawyers today at 1-516-342-2200 !

Schwartzapfel Lawyers, P.C. | Fighting For You™™

What Is an Insurance Claim? | Experian

What is assignment of benefits, and how does it impact insurers? | Insurance Business Mag

Florida Insurance Ruling Sets Precedent for Assignment of Benefits | Law.com

Related Posts

What is the number one cause of eye injuries for construction workers.

In New York City and across the state, construction sites are hubs of activity. Beneath the productive chaos, however, lurks

How To Prove Repetitive Strain Injury

On balance, repetitive strain injuries (RSIs) aren’t usually as dramatic as some of the other kinds of workplace accidents. Still,

Who Can Sue For Wrongful Death?

If your family has recently been impacted by the tragedy of a wrongful death, our hearts go out to you.

We'll Fight For You

Schwartzapfel® lawyers has a 99% client satisfaction rate, quick links.

• News & Events
• Verdicts & Settlements
• Video Gallery
• Wrongful Death
• Vehicle Accidents
• Slip & Fall
• Medical Malpractice
• Workers' Compensation
• Personal Injuries
• Product Liability
• Garden City

What is assignment of benefits, and how does it impact insurers?

While aob is convenient for policyholders, it has become quite the headache for insurers.

Insurance News

By Bethan Moorcraft

Assignment of benefits, widely referred to as AOB, is a contractual agreement signed by a policyholder, which enables a third party to file an insurance claim, make repair decisions, and directly bill an insurer on the policyholder’s behalf.

The Insurance Information Institute (III) describes AOB as “an efficient and customer-friendly way to settle claims.” Having a problem like a water leak in your home is stressful enough without having to negotiate an insurance claim. By signing an AOB, policyholders can leave that claim to the contractor they’ve brought in to fix the issue - in this case, potentially a plumber or a water remediation firm – and assuming that contractor acts in good faith, the repairs and the claim should be sorted without the policyholder losing too much sleep.

AOB – a fraudster’s playground In recent years, AOB has hit the headlines for all the wrong reasons. Loopholes in the way AOB is being used are enabling contractors and restoration companies to abuse the practice by inflating claims costs and charging insurance companies for work that was either unnecessary or simply wasn’t done at all. These fraudsters then keep any extra money for themselves.

Florida-based insurance brokerage, AssuredPartners, shared the following about AOB: “Once you sign an AOB, you lose control of the direction of your claim. The contractor takes control and can submit whatever they like to your insurance company, sometimes billing the company double, even triple the going market rate for their services, and sometimes including work that was never performed.

Read more: New to the insurance industry? Learn these basic terms.

“You don’t see this, and you can’t verify what was done but you have now committed to this contractor. You now have little to no recourse, nor are you able to comparison shop if you’re not satisfied with their work. Even if their work is incomplete, or you are unsatisfied with the end result, they can still claim compensation from the insurance company, which gets deducted from your benefits.”

A number of things could go wrong with AOB. When a vendor assumes control of a claim, that company is still bound by the terms and conditions of the original insurance policy. If a contractor violates any of those terms, the claim could be deemed void, leaving the policyholder out of pocket for a potentially significant loss.

Also, if the contractor files a claim and the insurance company does not agree with the dollar amount requested, under the AOB the contractor can engage in legal action against the insurer without the policyholder’s consent. According to the III, this can lead to: “a state of affairs in which legal fees can dwarf actual damages paid to the policyholder – sometimes tens of thousands of dollars for a single low-damage claim.”

Protecting policyholders from AOB fraud The National Insurance Crime Bureau, whose mission it is to combat insurance fraud, has published a checklist for policyholders – also something that brokers can share with any clients considering AOB – to consider before hiring a contractor:

• Get multiple estimates for any work / repairs that need doing
• Ask for references and check reviews
• Never let a contractor pressure you into hiring them
• Get everything in writing, including the cost of the work, payment schedules, exactly what work will be done, time schedules for that work, guarantees, and so on
• Read the contract in full. If there are any blanks or concerns, do not sign the contract
• Do not pay a contractor in full or sign a completion certificate until the required work is done
• Check all documents that are sent to your insurance carrier, and make sure you understand them
• Work with an insurance broker to ensure you understand insurance policy language and to get help with the claims process

Impact of AOB on the insurance industry Insurers who choose to dispute inflated AOB bills are up against it in the era of plaintiff-friendly court verdicts. If the insurance companies fight in court and lose, they must pay compensation to the plaintiff’s attorneys, but the opposite is not true if the insurers win their case. So, the cost of the legal expense is prohibitive for the insurance company either way, which is why many insurers opt to settle.

Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs – and insurers are forced to pass those costs on to consumers in the form of higher insurance premiums and more restrictive policy terms and conditions.

Related Stories

• What is wind deductible buyback coverage?
• Eight characteristics of a hard insurance market

LATEST NEWS

INSURANCE NEWS

Revolutionize your insurance approach at itc vegas 2024.

Office romances are on the rise – what are the risks for employers?

"Agents who use AI are going to replace agents who don't"

Amwins delivers the verdict on the builders risk market

LEGAL INSIGHTS

Tdi secures legal victory against roofing contractor, keep up with the latest news and events, join our mailing list, it’s free.

• 855-717-0022
• Log In  /  Create an Account

Assignment of benefits

Assignment of benefits is an agreement that gives your claims benefits to someone else.

What is an assignment of benefits?

An assignment of benefits (or AOB for short) is an agreement that gives your claims benefits, and in some instances complete control of your claim, to someone else. It’s usually used so that a contractor can "stand in your shoes" and file a claim, make decisions about repairs, and collect insurance payments from your insurance company directly for covered repairs. In some states, the contractor will even file a lawsuit against your insurer as your assignee.

Why do homeowners agree to an assignment of benefits?

Homeowners may sign an assignment of benefits form because they think it’s more convenient and efficient than dealing with the claims process firsthand.

Once a contractor has been assigned your benefits, they tell the insurance company what work they believe is required and negotiate the claim. For example, say you have a water leak in the house. You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input. That may sound like a relief at first glance – someone else can deal with all that!

But signing away your rights in the claims process may not be worth the risk.

Assignment of benefits in Florida: a case of rampant fraud

Because the assignment of benefits takes control out of the homeowner’s hands, insurance fraud is a major concern. Some contractors may take advantage of the situation and inflate repair needs and costs or bill for work that was never completed. They may also hire attorneys to sue the insurance company if it does not pay the full amount of their estimate or denies claims.

These lawsuits became a huge problem in Florida – by 2018, there were 135,000 AOB lawsuits , a 70 percent increase in 15 years. On the whole, the FBI estimates fraudulent claims account for nearly $6 billion of the $80 billion appropriated for post-hurricane reconstruction.

Florida eventually passed a bill in 2019 to curb the abuse of the assignment of benefits.

Ultimately, AOB fraud hurts homeowners the most. It increases homeowners insurance rates across the board, and you may be stuck with incomplete work and no recourse.

What responsibilities does the AOB contractor have?

Once you sign an AOB, a contractor has full power to make all decisions about the claim without consulting you. The assignment of benefits gives contractors the ability to:

• File the insurance claim .
• Work directly with insurance claims adjusters.
• Make repair decisions.
• Complete repairs.
• Directly bill the insurance carrier for all work completed.
• Sue your insurance company regarding your claim.

Sometimes the assignment of benefits limits the scope of the work the contractor was hired for. For example, say your home has a leaky pipe. You may hire a plumber to fix the leak, a remediation company to dry the walls and carpet, and a general contractor to replace the bathroom cabinets. Each of the three contractors may have a respective assignment of benefits for their part of the job.

How assignment of benefits impact homeowners

Under some circumstances, an assignment of benefits agreement could work out for homeowners who don’t want to handle their insurance claim. If the contractor is reputable, performs the work, and knows what information the insurance company needs, it can be a big help.

For example:

• The claims adjuster will work directly with the contractor.
• The contractor would handle remediation and repairs.
• The contractor would bill the insurance company, not the homeowner.

AOB arrangements only work for covered damage in need of repair. If you must replace belongings or appliances, you’d still need to work directly with your insurer and payments would go to you.

Protecting yourself in an assignment of benefits agreement

Don’t sign an assignment of benefits agreement right off the bat. Before you hire any contractor:

• Get multiple quotes.
• Check references, licenses, and their insurance.
• Get written estimates for potential work.
• Get a guarantee to back the workmanship.
• Make sure you get to approve the completed work.
• Request copies of all paperwork sent to your insurance company.
• Require that the contractor show you the documents you are actually signing.

You might be tempted to hire the first contractor you find, but you save yourself headaches if you do some due diligence before signing an assignment of benefits. Great contractors use this to expedite repairs and spare you some work. Take a beat to find that great contractor.

Related Posts: Keep exploring

Displaying post 1 / 3

What is an assignment of benefits?

The last time you sought medical care, you likely made an appointment with your provider, got the treatment you needed, paid your copay or deductible, and that was it. No paperwork, no waiting to be reimbursed; your doctor received payment from your insurance company and you both went on with your lives.

This is how most people receive health care in the U.S. This system, known as assignment of benefits or AOB, is now being used with other types of insurance, including auto and homeowners coverage . 

What is an assignment of benefits?  

An AOB is a legal agreement that allows your insurance company to directly pay a third party for services performed on your behalf. In the case of health care, it could be your doctor or another medical professional providing care. With a homeowners, renters, or auto insurance claim, the third party could be a contractor, auto repair shop, or other facility.

Assignment of benefits is legal, thanks to a concept known as freedom of contract, which says two parties may make a private agreement, including the forfeiture of certain rights, and the government may not interfere. There are exceptions, making freedom of contract something less than an absolute right. For example, the contract may not violate the law or contain unfair terms.

Not all doctors or contractors utilize AOBs. Therefore, it’s a good idea to make sure the doctor or service provider and you are on the same page when it comes to AOBs before treatment or work begins.

How an AOB works

The function of an AOB agreement varies depending on the type of insurance policy involved, the healthcare provider, contractor, or service provider, and increasingly, state law. Although an AOB is normal in health insurance, other applications of assignment of benefits have now included the auto and homeowners insurance industry.

Because AOBs are common in health care, you probably don’t think twice about signing a piece of paper that says “assignment of benefits” across the top. But once you sign it, you’re likely turning over your right to deal with your insurance company regarding service from that provider. Why would you do this? 

According to Dr. David Berg of Redirect Health , the reason is simple: “Without an AOB in place, the patient themselves would be responsible for paying the cost of their service and would then file a claim with their insurance company for reimbursement.”

With homeowners or auto insurance, the same rules apply. Once you sign the AOB, you are effectively out of the picture. The contractor who reroofs your house or the mechanic who rebuilds your engine works with your insurance company by filing a claim on your behalf and receiving their money without your help or involvement.

“Each state has its own rules, regulations, and permissions regarding AOBs,” says Gregg Barrett, founder and CEO of WaterStreet , a cloud-based P&C insurance administration platform. “Some states require a strict written breakdown of work to be done, while others allow assignment of only parts of claims.” 

Within the guidelines of the specific insurance rules for AOBs in your state, the general steps include:

• You and your contractor draw up an AOB clause as part of the contract.
• The contract stipulates the exact work that will be completed and all necessary details.
• The contractor sends the completed AOB to the insurance company where an adjuster reviews, asks questions, and resolves any discrepancies.
• The contractor’s name (or that of an agreed-upon party) is listed to go on the settlement check.

After work is complete and signed off, the insurer will issue the check and the claim will be considered settled.

The 10 best insurance companies for small businesses What is bond insurance, and how can it protect your business?

Example of an assignment of benefits  

If you’re dealing with insurance, how would an AOB factor in? Let’s take an example. “Say you have a water leak in the house,” says Angel Conlin, chief insurance officer at Kin Insurance . “You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input.”

In this case, by eliminating the homeowner, whose interests are already represented by an experienced insurance adjustor, the AOB reduces redundancy, saves time and money, and allows the restoration process to proceed with much greater efficiency.

When would you need to use an assignment of benefits?  

An AOB can simplify complicated and costly insurance transactions and allow you to turn these transactions over to trusted experts, thereby avoiding time-consuming negotiations. 

An AOB also frees you from paying the entire bill upfront and seeking reimbursement from your insurance company after work has been completed or services rendered. Since you are not required to sign an assignment of benefits, failure to sign will result in you paying the entire medical bill and filing for reimbursement. The three most common uses of AOBs are with health insurance, car insurance, and homeowners insurance.

Assignment of benefits for health insurance

As discussed, AOBs in health insurance are commonplace. If you have health insurance, you’ve probably signed AOBs for years. Each provider (doctor) or practice requires a separate AOB. From your point of view, the big advantages of an AOB are that you receive medical care, your doctor and insurance company work out the details and, in the event of a disagreement, those two entities deal with each other. 

Assignment of benefits for car owners

If your car is damaged in an accident and needs extensive repair, the benefits of an AOB can quickly add up. Not only will you have your automobile repaired with minimal upfront costs to you, inconvenience will be almost nonexistent. You drop your car off (or have it towed), wait to be called, told the repair is finished, and pick it up. Similar to a health care AOB, disagreements are worked out between the provider and insurer. You are usually not involved.

Assignment of benefits for homeowners  

When your home or belongings are damaged or destroyed, your primary concern is to “return to normal.” You want to do this with the least amount of hassle. An AOB allows you to transfer your rights to a third party, usually a contractor, freeing you to deal with the crisis at hand.

When you sign an AOB, your contractor can begin immediately working on damage repair, shoring up against additional deterioration, and coordinating with various subcontractors without waiting for clearance or communication with you.

The fraud factor

No legal agreement, including an AOB, is free from the possibility of abuse or fraud. Built-in safeguards are essential to ensure the benefits you assign to a third party are as protected as possible.

In terms of what can and does go wrong, the answer is: plenty. According to the National Association of Mutual Insurance Companies (NAMICs), examples of AOB fraud include inflated invoices or charges for work that hasn’t been done. Another common tactic is to sue the insurance company, without the policyholder’s knowledge or consent, something that can ultimately result in the policyholder being stuck with the bill and higher insurance premiums due to losses experienced by the insurer.

State legislatures have tried to protect consumers from AOB fraud and some progress has been made. Florida, for example, passed legislation in 2019 that gives consumers the right to rescind a fraudulent contract and requires that AOB contracts include an itemized description of the work to be done. Other states, including North Dakota, Kansas, and Iowa have all signed NAMIC-backed legislation into law to protect consumers from AOB fraud.

The National Association of Insurance Commissioners (NAIC), offers advice for consumers to help avoid AOB fraud and abuse:

• File a claim with your insurer before you hire a contractor. This ensures you know what repairs need to be made.
• Don’t pay in full upfront. Legitimate contractors do not require it.
• Get three estimates before selecting a contractor.
• Get a full written contract and read it carefully before signing.
• Don’t be pressured into signing an AOB. You are not required to sign an AOB.

Pros and cons of an assignment of benefits  

The advantages and disadvantages of an AOB agreement depend largely on the amount and type of protection your state’s insurance laws provide.  

• An AOB frees you from paying for services and waiting for reimbursement from your insurer
• Some people appreciate not needing to negotiate with their insurer
• You are not required to sign an AOB.
• Signing an AOB could make you the victim of a scam without knowing it until your insurer refuses to pay
• An AOB doesn’t free you from the ultimate responsibility to pay for services rendered, which could drag you into expensive litigation if things go south
• Any AOB you do sign is legally binding

The takeaway  

An AOB, as the health insurance example shows, can simplify complicated and costly insurance transactions and help consumers avoid time-consuming negotiations. And it can save upfront costs while letting experts work out the details.

It can also introduce a nightmare scenario laced with fraud requiring years of costly litigation. Universal state-level legislation with safeguards is required to avoid the latter. Until that is in place, your best bet is to work closely with your insurer when signing an AOB. Look for suspicious or inflated charges when negotiating with contractors, providers, and other servicers.

Follow Fortune Recommends on Facebook and Twitter .

EDITORIAL DISCLOSURE : The advice, opinions, or rankings contained in this article are solely those of the Fortune Recommends ™ editorial team. This content has not been reviewed or endorsed by any of our affiliate partners or other third parties.

Assignment Of Benefits

What does assignment of benefits mean.

Assignment of benefits (AOB) is the official way an insured person asks their insurance company to pay a professional or facility for services rendered.

Insuranceopedia Explains Assignment Of Benefits

Assignment of benefits is a document that directs payment to a third party at the insured’s request. It becomes legitimate once both the insured party and their insurer have signed the AOB form. AOB is used in a number of insurance contexts, such as paying physicians or clinics through health insurance or paying contractors for repairs through a homeowner’s insurance policy.

Usually, AOBs are issued when the third party pursues it in the hopes that payment from the insurance company will be more certain and delivered more quickly than it would be from the insured.

Related Definitions

Rental value insurance, change of occupation provision, force-placed insurance, guaranteed asset protection insurance, insurance to value, loss report, no benefit to bailee provision, guaranteed renewable contract, related terms, certificate of coverage, third party, medical payments insurance, related articles, how to lower your health insurance rates, 10 tips for choosing the right health insurance policy, 10 things you need to know about health insurance in the united states, the ultimate guide to auto insurance, insurance self-service portal: the future of customer experience, blockchain’s impact on transforming the insurance landscape, trending articles.

Home » Coverage Exclusions » Assignment of Benefits

Assignment of Benefits for Homeowners

• How They Work
• Using Your AOB
• Pros & Cons
• Safe & Secure
• Watch Out for Abuse
• Frequently Asked Questions

An assignment of benefits (AOB) is a contractual agreement that enables a third party to access insurance benefits on behalf of the policyholder.[1] When the policyholder signs an AOB agreement, it grants the third party the authority to initiate an insurance claim and receive reimbursement directly from the insurance company. 

Assignment of benefits for homeowners means that any contractors , plumbers, or other professionals who perform work to repair your home or property after a claim will work with your insurance provider directly to get compensated. You step aside as the middleman, and they work together.  

While AOB can work with most types of insurance, not every insurance company will allow it. The party performing the work (the insurance claimant) and your insurance company must both agree to the process.

• As the policyholder, you must willingly sign an AOB agreement, giving explicit consent for a third party to access their insurance benefits.
• AOBs make things easier for both you as the policyholder and for the service provider.
• The service provider takes care of filing the claim, deciding on repairs, and getting paid by the insurance company, relieving you (the policyholder) of having to manage these details.

How Do Assignment of Benefits Work?

AOB is a straightforward process that simplifies insurance billing for both service providers and policyholders. Here is how an AOB works:

Coverage Approved

Before hiring a service provider, the policyholder must make sure that the service is covered by their policy by checking in with the insurance provider. In most medical situations, the billing staff will handle this on behalf of the patient, but in the cases of homeowners insurance, it may be necessary for the policyholder to manage this step.

Service Rendered

The policyholder, whether a patient or property owner, receives necessary services covered by their insurance policy, such as medical treatment or repairs.

Mutual Agreement

The policyholder and the service provider agree to utilize an AOB form.[2] This agreement authorizes the service provider to handle direct billing to the insurance company for the services provided.

Billing Submission

With the AOB form in place, the service provider submits all relevant documentation, including invoices and service records, to the insurance company for payment.

Claim Evaluation

The insurance company thoroughly reviews the submitted documents to verify that the provided services are indeed covered under the policy terms and that the contractor provided those same services.

Direct Payment

If the services are eligible and covered by the insurance policy, the insurance company promptly issues payment directly to the service provider. This payment aligns with the agreed-upon costs as outlined in the insurance policy.

Policyholder’s Responsibility

Generally, the policyholder is only responsible for any deductibles, copays, or out-of-pocket expenses specified in their insurance policy.[3] They are relieved of the responsibility of managing the billing process or handling reimbursement paperwork.

Example of an Assignment of Benefits

A hurricane hit Rachel’s town, severely damaging the shed where she keeps her tools and lawn equipment. The shed is covered under her home insurance policy, and she files a claim with the insurance provider quickly with photographs and documents that show the damage and provide proof of the value and potential cost to rebuild. The insurance provider approves the replacement of the shed.

To streamline the process of paying the contractor, Rachel signs an AOB allowing the contractor to bill the insurance provider rather than billing her. This means that if there are any disputes about the costs of materials, timeliness of payment, or any other issues, those will happen between the insurance company and the contractor, and Rachel will not be required to step in. 

Additionally, rather than having to pay the contractor out of pocket and wait for a reimbursement check from the provider, the contractor will be paid directly by the insurance company, so Rachel doesn’t have to pay the cost of the shed replacement.

When Would You Use Your Assignment of Benefits?

AOBs can be useful in various situations:

• Assign benefits to contractors for property damage repairs, simplifying the insurance claim process. It can often expedite the process and help claimants to get paid faster.
• AOBs can help in emergencies, ensuring timely payment without paperwork hassles. This can be particularly helpful during already high-stress times. 
• Consider AOBs for complex claims with multiple providers or extensive paperwork. You’ll have less to manage if the parties work together directly.
• You can use an AOB for a range of professionals that relate to a homeowners insurance claim, such as plumbers, roofers, window repair specialists, landscapers, carpenters, and restoration specialists.

Pros & Cons of Using Assignment of Benefits

Making Sure Your AOB Is Safe & Secure

To ensure the safety of an AOB:

• Check the reputation of the service provider and seek multiple quotes for services.[4]
• Carefully examine the AOB terms, ensuring clarity and alignment with your insurance policy.
• Beware of high-pressure tactics and take your time to decide.
• Confirm the provider’s licensing and insurance.
• Get multiple estimates in writing for the needed work.
• Consult an attorney or insurance advisor if you have concerns.
• Keep records of communication and contracts.
• Inform your insurer about the AOB and their requirements.
• After services, check the results against AOB terms and your satisfaction.

Assignment of Benefits Being Abused: What Are My Options?

While an AOB can offer convenience, the process may be susceptible to misuse by those who would take advantage of the insurance company and overcharge for services or claim to have provided services that they did not actually perform. 

If you suspect AOB abuse, consider these options:

Contact Your Insurer 

If you suspect AOB abuse, promptly reach out to your insurance company. Express your concerns and provide any evidence you have to support your concerns. Insurers have units dedicated to investigating potential fraud or AOB misuse.

Report Fraud

If you suspect fraudulent activities, report the issue to your state’s insurance fraud bureau or department, which investigates such cases and takes legal action when appropriate. However, fraud is generally difficult to prove. 

Seek Legal Counsel

Get advice from an attorney who is experienced in insurance claims to navigate your specific situation. Be aware that pursuing legal action can be costly and lengthy, so it generally won’t be your first course of action. But if the process gets complicated, it’s helpful to have a legal professional on your side.

Know About Potential Litigation

If the contractor or service provider isn’t paid by your insurance company, they might pursue legal action against your provider, leading to a dispute that may require your action or response.

Frequently Asked Questions About Assignment of Benefits (AOB) for Homeowners

We have compiled some of the most frequently asked questions about AOBs and how to use them most effectively, so you can make the most informed decisions about your situation.

An assignment of benefits, also referred to as an AOB, in homeowners insurance is when you allow a contractor or service provider to take over your insurance claim process. They deal directly with the insurance company for tasks like repairs or damage assessments.  This can simplify and expedite the process since the service provider is dealing directly with your insurance company without you serving as the intermediary. 

All parties must agree to the process. As the policyholder, you’ll sign off on the process, and both the services provider and your insurance company must also agree to the process.

Using an AOB can be beneficial if it is used wisely and for the purposes of working with reputable service providers. It streamlines claims, but it also comes with potential risks like fraud. Proceed with caution and agree to an AOB only if you feel confident that you are working with trusted parties. Also, be aware that not all insurance companies allow AOBs. Consult your insurance provider to ensure they do before proceeding.

In recent years, AOBs have been the target of fraud. Some service providers have inflated their invoices, billing for work that wasn’t performed. In some cases, claimants sue the insurance company, resulting in higher premiums for the policyholder down the road.

An AOB simplifies the insurance claims process for policyholders, letting service providers handle the work of getting paid for their services. This reduces responsibility and stress for policyholders and can often serve the best interests of all parties.

An AOB on a claim form is a line item where you authorize a service provider to receive insurance benefits for a specific claim. It lets that provider directly bill and get paid by the insurance company, simplifying the process for you. Make sure to understand the terms before signing it.[2] In some cases, it could mean you are responsible for any fees billed by your service provider if your insurance company doesn’t pay the full amount.

Related Pages

• The Do’s & Don’ts of Submitting a Homeowners Insurance Claim
• How Long Will My Homeowners Insurance Claim Take?
• How to File a Homeowners Insurance Claim
• How to Document Property Damage for Your Claim
• How to Speed Up Your Homeowners Insurance Claim
• Insurance Claims & Appeals

Post Disaster Claims Guide . National Association of Insurance Commissioners.

Assignment of Benefits . Department of Health and Human Services – North Dakota.

Understanding Dental Assignment of Benefits . West Virginia Offices of the Insurance Commissioner.

Assignment of Benefits: Consumer Beware . (April 2020). National Association of Insurance Commissioners.

All You Need to Know About Assignment of Benefits

When most people purchase insurance, they concentrate on what the insurance will cover, not how they’ll make the payments. When you sign an assignment of benefits agreement, you bypass dealing with an insurance company’s claims department and allow the benefits to be paid directly to the provider.

For example, the assignment of benefits medical definition is when you sign a form that requires your health insurance provider to pay the hospital or physician directly .

What is Assignment of Benefits?

When you visit an in-network doctor in a contract with your insurance company, the assignment of benefits (AOB) happens automatically . That hospital receives payment right from the insurance company, and the provider handles everything related to billing.

But if your doctor is out-of-network, you might have to sign an AOB agreement that’s included in the paperwork when you check in. In this instance, the hospital will receive a portion of the payment from the insurance company and bill you for the rest.

Understanding AOB

Some wonder, what is the purpose of an assignment of benefits form? The answer is simple. This form gives the insurance company written authorization to release information that the hospital requires for reimbursement purposes. It also allows medical billing and collection companies to use that information for their billing purposes. When you sign this form, you agree to appoint anyone from the hospital to seek payment from the insurance payer on your behalf. After you sign the AOB form, you won’t have to deal with the insurance company directly unless you are explicitly asked.

 Make a note of the fact that the insurance company is not required to accept or honor the AOB. Whether or not they do will depend on your benefits contract and the state law.

Who Uses AOB

To follow are services that use AOB:

● Ambulance services.

● Clinical diagnostic laboratory services.

● Home dialysis equipment and supplies.

● Physician services for patients who hold Medicare and Medicaid plans

● Services other than a primary physician, including clinical psychologists, clinical social workers, nurse midwives, etc.

● Simplified billing roster for vaccines.

● And more.

Having an AOB in place speeds up the process because it takes away the need to contact the patient directly. It can also increase the chance of reimbursement.

Your AOB Agreement

At Montiel Hodge, we can help you navigate your AOB form and understand the language and terms of the contract. Get in touch with us before you sign - reach out to our team today .

How Assignments of Benefits (AOB) Impact Insurers

Everything you need to know about the longshore and harbor workers compensation act.

Assignment of Benefits (AOB)

Have you heard of the term assignment of benefits ? Do you know how it impacts you? An AOB is an agreement that, once signed, transfers the insurance claims rights or benefits of your insurance policy to a third party.

An AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without your involvement.

Review the resources below to better understand how transferring your insurance claims rights can impact you and your family.

What is an assignment of benefits?

An AOB is an agreement that 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 have been used with life and health insurance policies for many years. However, AOBs are now being commonly used in homeowners’ insurance claims by restoration companies and contractors. Signing an AOB can be helpful with navigating the claims process, but if misused, it can lead to harmful consequences for the homeowner.

For example, you have a pipe leak in your home that causes water damage. If you call a restoration company to make repairs and sign an AOB that transfers your insurance rights to the company, the company can file a claim on your behalf and be paid directly.

What information must be included in an assignment of benefits?

The AOB must contain a written, itemized, per-unit cost estimate of the services to be performed by the third-party assignee and it must only relate to the work to be performed for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.

The AOB must contain a notification in 18-point, uppercase, boldfaced font that advises you that you are giving up certain rights under your insurance policy to a third party. The notification must also include the rescission terms.

The AOB must contain a provision that requires the third-party assignee to indemnify and hold you harmless from all liabilities, damages, losses, and costs (including attorney fees) if the policy prohibits an AOB. The execution of the AOB constitutes a waiver by the third-party assignee and its subcontractors of claims against you for payment arising from the AOB. The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.

The AOB prohibits the third-party assignee from seeking payment from you in any amount in excess of the applicable policy deductible unless you have agreed to have additional work performed at your own expense.

The AOB cannot assign the right to recover attorney fees to the third-party assignee. In a suit related to an assignment agreement for claims arising under a residential or commercial property damage, the right to recover attorney fees stays with the assignor.

Florida law prohibits a third-party assignee from including the following charges/fees in an AOB:

• A penalty or fee for rescission of the AOB during the timeframes outlined in the AOB.
• A check or mortgage processing fee.
• A penalty or fee for cancellation of the AOB.
• An administrative fee.

If you are concerned with the language or terms of the contract, you should seek legal advice prior to signing the AOB. If you have questions as to whether the AOB incorporates the provisions required by Florida law, you may contact the Florida Department of Financial Services Insurance Consumer Helpline at 877-693-5236. If the AOB complies with all requirements stipulated by law, once the AOB has been signed, if the third-party assignee will not agree to release you from the contract, the only recourse is to pursue resolution in a court of law.

What responsibilities does the third-party assignee have under an assignment of benefits?

The assignee must provide a copy of the AOB to your insurance company within 3 business days following its execution, or the date work commenced, whichever is earlier.

The assignee must comply with certain policyholder duties as stipulated by the policy including the responsibility to maintain records of all services provided, cooperate with the insurance company’s claim investigation and provide the insurance company with requested records and documents related to the services provided. As a pre-condition to filing suit, the assignee must submit to examinations under oath or recorded statements related to the services provided, the associated cost, and the AOB itself.

Is an assignment of benefits a legal contract? How can I get out of the contract?

Yes. An AOB is a legal contract and it must contain three specific cancellation provisions.

• The AOB must provide you with an option to rescind the AOB contract within 14 days following its execution by submitting written notice to the third party.
• The AOB must provide you with the option to rescind the AOB at least 30 days following its execution if the AOB does not contain a commencement date, and the third party has not begun substantial work on the property.
• The AOB must provide you with the option to rescind the AOB if the third party has not “substantially performed” at least 30 days following the scheduled commencement date.

NOTE: Recent legislative changes prohibit a policyholder from assigning any post-loss benefits of a residential or commercial property insurance contract issued or renewed on or after January 1, 2023. Therefore, Assignment of Benefit agreements may not be established for claims made under contracts subject to this new law.

If I have suffered damage to my insured property, what should I do first?

If you have damage, you should take the necessary steps to mitigate the damage and prevent any additional damage from occurring. This would include any temporary repairs such as covering the roof or removing standing water. You should also immediately contact your insurance company to inform them of the damage and file a claim.

Do not allow a third party, such as a water remediation firm or contractor, to contact your insurance company for you. You should be the one to make the first contact with your insurance company. You do not need to sign an AOB in order to get your insurance claim processed or your residence repaired.

How does an assignment of benefits impact me, as a homeowner?

An AOB can be helpful with navigating the claims process, but if misused it can lead to harmful consequences. Below are a few things to keep in mind:

• You are signing over the rights and benefits of your insurance policy to a third party.
• Depending on the language in the AOB, the insurance company may only be permitted to communicate directly with the third party and you may lose all rights to the insurance claim, including the right to mediate the claim, or to make any decisions regarding the claim, including repairs.
• Depending on the language in the AOB, the third party may be able to endorse checks on your behalf.
• Once you have signed an AOB, the third party may file suit against your insurance company.

Tips to remember before and after you have suffered damage:

• Thoroughly review your insurance policy to ensure you understand the policy, including your coverage, deductibles and responsibilities after damage has occurred. You must also verify if your policy prohibits or otherwise restricts an AOB.
• Immediately following a loss, you have a contractual duty to mitigate your damages and make any temporary repairs to prevent further damage from occurring. Document any existing damage with photographs prior to making any repairs. Do not make permanent repairs prior to an inspection by the insurance company adjuster. The company has a right to inspect the damage prior to repair.
• Make sure you thoroughly review and understand any contracts you sign with repair companies, including an AOB. If you do not agree with the provisions of the AOB, you may be able to negotiate the provisions of the contract. You do not need to sign an AOB to get your insurance claim processed or your residence repaired. If you are asked to sign an AOB, make sure you read it carefully and clearly understand what rights and benefits you may be signing away.
• Verify the license (if one is required) of any contractor or vendor that you hire to make repairs to your property. You should also verify the company or person’s general liability and workers’ compensation insurance coverage.

Below is a checklist that may be helpful when reporting a claim:

• Contact your insurance company directly to report the damage and set up a time for the adjuster to inspect the damages. Do not allow a third party, such as a water remediation firm or contractor, to contact your insurance company for you. You should be the one to make the first contact with your insurance company - as soon as possible.
• Take photos of the damage.
• Make emergency or temporary repairs.
• Make an inventory of any damaged items.
• Save receipts for any repairs.
• Do not discard any damaged items without prior approval from the insurance company.
• Make a list of any questions you would like to ask the insurance adjuster.
• Request a copy of the fire or police report, if applicable.

Assignment of Benefits (AOB)  is an agreement that 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.

Assignor  is a person who assigns insurance claims rights or policy benefits to another person or entity through an AOB.

Assignee or Third-Party  is a person or entity who is assigned insurance claims rights or policy benefits 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.

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.

Assignment of Benefits Video View this scenario-based video to understand how signing an Assignment of Benefits may impact you as a policyholder. Watch Video

Assignment of Benefits Brochure This downloadable brochure includes definitions, tips and information on Assignment of Benefits. English or Spanish

Consumer Tips & Red Flags Know your rights and the red flags to look for when making a decision concerning Assignment of Benefits. English or Spanish

What to Expect After Filing a Homeowners Claim Learn more about what to expect after reporting a claim to your insurance company or agent. English , Spanish or Creole

The Flood Claims Process Learn more about what to expect after reporting a flood claim to your insurance company or agent. English

• Today's news
• Reviews and deals
• Climate change
• 2024 election
• Fall allergies
• Health news
• Mental health
• Sexual health
• Family health
• So mini ways
• Unapologetically
• Buying guides

Entertainment

• How to Watch
• My Portfolio
• Latest News
• Stock Market
• Premium News
• Biden Economy
• Stocks: Most Actives
• Stocks: Gainers
• Stocks: Losers
• Trending Tickers
• World Indices
• US Treasury Bonds
• Top Mutual Funds
• Highest Open Interest
• Highest Implied Volatility
• Stock Comparison
• Advanced Charts
• Currency Converter
• Investment Ideas
• Research Reports
• Basic Materials
• Communication Services
• Consumer Cyclical
• Consumer Defensive
• Financial Services
• Industrials
• Real Estate
• Mutual Funds
• Analyst Rating
• Technical Events
• Smart Money
• Top Holdings
• Credit Cards
• Balance Transfer Cards
• Cash-back Cards
• Rewards Cards
• Travel Cards
• Student Loans
• Personal Loans
• Car Insurance
• Mortgage Calculator
• Morning Brief
• Market Domination
• Market Domination Overtime
• Asking for a Trend
• Opening Bid
• Stocks in Translation
• Lead This Way
• Good Buy or Goodbye?
• Fantasy football
• Pro Pick 'Em
• College Pick 'Em
• Fantasy baseball
• Fantasy hockey
• Fantasy basketball
• Download the app
• Daily fantasy
• Scores and schedules
• GameChannel
• World Baseball Classic
• Premier League
• CONCACAF League
• Champions League
• Motorsports
• Horse racing
• Newsletters

New on Yahoo

• Privacy Dashboard

Yahoo Finance

What is an assignment of benefits.

The last time you sought medical care, you likely made an appointment with your provider, got the treatment you needed, paid your copay or deductible, and that was it. No paperwork, no waiting to be reimbursed; your doctor received payment from your insurance company and you both went on with your lives.

This is how most people receive health care in the U.S. This system, known as assignment of benefits or AOB, is now being used with other types of insurance, including auto and homeowners coverage .

An AOB is a legal agreement that allows your insurance company to directly pay a third party for services performed on your behalf. In the case of health care, it could be your doctor or another medical professional providing care. With a homeowners, renters, or auto insurance claim, the third party could be a contractor, auto repair shop, or other facility.

Assignment of benefits is legal, thanks to a concept known as freedom of contract, which says two parties may make a private agreement, including the forfeiture of certain rights, and the government may not interfere. There are exceptions, making freedom of contract something less than an absolute right. For example, the contract may not violate the law or contain unfair terms.

Not all doctors or contractors utilize AOBs. Therefore, it’s a good idea to make sure the doctor or service provider and you are on the same page when it comes to AOBs before treatment or work begins.

How an AOB works

The function of an AOB agreement varies depending on the type of insurance policy involved, the healthcare provider, contractor, or service provider, and increasingly, state law. Although an AOB is normal in health insurance, other applications of assignment of benefits have now included the auto and homeowners insurance industry.

Because AOBs are common in health care, you probably don’t think twice about signing a piece of paper that says "assignment of benefits" across the top. But once you sign it, you’re likely turning over your right to deal with your insurance company regarding service from that provider. Why would you do this?

According to Dr. David Berg of Redirect Health, the reason is simple: “Without an AOB in place, the patient themselves would be responsible for paying the cost of their service and would then file a claim with their insurance company for reimbursement.”

With homeowners or auto insurance, the same rules apply. Once you sign the AOB, you are effectively out of the picture. The contractor who reroofs your house or the mechanic who rebuilds your engine works with your insurance company by filing a claim on your behalf and receiving their money without your help or involvement.

“Each state has its own rules, regulations, and permissions regarding AOBs,” says Gregg Barrett, founder and CEO of WaterStreet , a cloud-based P&C insurance administration platform. “Some states require a strict written breakdown of work to be done, while others allow assignment of only parts of claims.”

Within the guidelines of the specific insurance rules for AOBs in your state, the general steps include:

You and your contractor draw up an AOB clause as part of the contract.

The contract stipulates the exact work that will be completed and all necessary details.

The contractor sends the completed AOB to the insurance company where an adjuster reviews, asks questions, and resolves any discrepancies.

The contractor’s name (or that of an agreed-upon party) is listed to go on the settlement check.

After work is complete and signed off, the insurer will issue the check and the claim will be considered settled.

Example of an assignment of benefits

If you’re dealing with insurance, how would an AOB factor in? Let’s take an example. “Say you have a water leak in the house,” says Angel Conlin, chief insurance officer at Kin Insurance . “You call a home restoration company to stop the water flow, clean up the mess, and restore your home to its former glory. The restoration company may ask for an assignment of benefits so it can deal directly with the insurance company without your input.”

In this case, by eliminating the homeowner, whose interests are already represented by an experienced insurance adjustor, the AOB reduces redundancy, saves time and money, and allows the restoration process to proceed with much greater efficiency.

When would you need to use an assignment of benefits?

An AOB can simplify complicated and costly insurance transactions and allow you to turn these transactions over to trusted experts, thereby avoiding time-consuming negotiations.

An AOB also frees you from paying the entire bill upfront and seeking reimbursement from your insurance company after work has been completed or services rendered. Since you are not required to sign an assignment of benefits, failure to sign will result in you paying the entire medical bill and filing for reimbursement. The three most common uses of AOBs are with health insurance, car insurance, and homeowners insurance.

Assignment of benefits for health insurance

As discussed, AOBs in health insurance are commonplace. If you have health insurance, you’ve probably signed AOBs for years. Each provider (doctor) or practice requires a separate AOB. From your point of view, the big advantages of an AOB are that you receive medical care, your doctor and insurance company work out the details and, in the event of a disagreement, those two entities deal with each other.

Assignment of benefits for car owners

If your car is damaged in an accident and needs extensive repair, the benefits of an AOB can quickly add up. Not only will you have your automobile repaired with minimal upfront costs to you, inconvenience will be almost nonexistent. You drop your car off (or have it towed), wait to be called, told the repair is finished, and pick it up. Similar to a health care AOB, disagreements are worked out between the provider and insurer. You are usually not involved.

Assignment of benefits for homeowners

When your home or belongings are damaged or destroyed, your primary concern is to “return to normal.” You want to do this with the least amount of hassle. An AOB allows you to transfer your rights to a third party, usually a contractor, freeing you to deal with the crisis at hand.

When you sign an AOB, your contractor can begin immediately working on damage repair, shoring up against additional deterioration, and coordinating with various subcontractors without waiting for clearance or communication with you.

The fraud factor

No legal agreement, including an AOB, is free from the possibility of abuse or fraud. Built-in safeguards are essential to ensure the benefits you assign to a third party are as protected as possible.

In terms of what can and does go wrong, the answer is: plenty. According to the National Association of Mutual Insurance Companies (NAMICs), examples of AOB fraud include inflated invoices or charges for work that hasn’t been done. Another common tactic is to sue the insurance company, without the policyholder’s knowledge or consent, something that can ultimately result in the policyholder being stuck with the bill and higher insurance premiums due to losses experienced by the insurer.

State legislatures have tried to protect consumers from AOB fraud and some progress has been made. Florida, for example, passed legislation in 2019 that gives consumers the right to rescind a fraudulent contract and requires that AOB contracts include an itemized description of the work to be done. Other states, including North Dakota, Kansas, and Iowa have all signed NAMIC-backed legislation into law to protect consumers from AOB fraud.

The National Association of Insurance Commissioners (NAIC), offers advice for consumers to help avoid AOB fraud and abuse:

File a claim with your insurer before you hire a contractor. This ensures you know what repairs need to be made.

Don’t pay in full upfront. Legitimate contractors do not require it.

Get three estimates before selecting a contractor.

Get a full written contract and read it carefully before signing.

Don’t be pressured into signing an AOB. You are not required to sign an AOB.

Pros and cons of an assignment of benefits

The advantages and disadvantages of an AOB agreement depend largely on the amount and type of protection your state’s insurance laws provide.

Pros of assignment of benefits

With proper safeguards in place to reduce opportunities for fraud, AOBs have the ability to streamline and simplify the insurance claims process.

An AOB frees you from paying for services and waiting for reimbursement from your insurer.

Some people appreciate not needing to negotiate with their insurer.

You are not required to sign an AOB.

Cons of assignment of benefits

As with most contracts, AOBs are a double-edged sword. Be aware of potential traps and ask questions if you are unsure.

Signing an AOB could make you the victim of a scam without knowing it until your insurer refuses to pay.

An AOB doesn’t free you from the ultimate responsibility to pay for services rendered, which could drag you into expensive litigation if things go south.

Any AOB you do sign is legally binding.

The takeaway

An AOB, as the health insurance example shows, can simplify complicated and costly insurance transactions and help consumers avoid time-consuming negotiations. And it can save upfront costs while letting experts work out the details.

It can also introduce a nightmare scenario laced with fraud requiring years of costly litigation. Universal state-level legislation with safeguards is required to avoid the latter. Until that is in place, your best bet is to work closely with your insurer when signing an AOB. Look for suspicious or inflated charges when negotiating with contractors, providers, and other servicers.

This story was originally featured on Fortune.com

More from Fortune:

The economist who just won the Nobel Prize warns the Fed will cause ‘all kinds of trouble’

Microsoft’s remote-work-friendly CEO puts his finger on the big problem with working from home

Gen Z activists who dumped 2 cans of tomato soup on Van Gogh’s ‘Sunflowers’ plead not guilty in court

South Korea stands to lose billions from making K-pop superstars BTS do military service

• Up next Advertisement

Parent Press

a Goally Publication

What is an Assignment of Benefits?

Home >> Neurodiversopedia >> A Terms

An Assignment of Benefits (AOB) is a legal contract that allows someone else, like a doctor or therapist, to get paid directly by your insurance company. This helps make sure they get paid quickly for the services they provide to your child with special needs.

Table of Contents

• Frequently Asked Questions
• Science Person Definition

Assignment of Benefits in Action

How assignment of benefits is used, recommended products, related topics, frequently asked question.

What is an Assignment of Benefits (AOB)?

An Assignment of Benefits (AOB) is a legal agreement allowing a provider to bill your insurance directly for services.

How does an Assignment of Benefits work?

You sign an AOB, and your insurance company pays the provider directly for the services your child receives.

Why is an Assignment of Benefits important for kids with special needs?

It ensures timely payments to providers, allowing continuous and uninterrupted care for your child.

Can an Assignment of Benefits reduce out-of-pocket expenses?

Yes, an AOB can reduce out-of-pocket expenses by having the insurance pay the provider directly.

Scientific Definition

An Assignment of Benefits (AOB) is a legal agreement in which a policyholder transfers the rights to insurance claims to a third party, known as the assignee. This arrangement permits the assignee to file claims, make decisions about services, and receive direct payments from the insurance company. AOBs are often used in healthcare to ensure that providers receive payment without delay, which is crucial for continuous support and therapy for kids with special needs.

Helpful Resources

• Centers for Medicare & Medicaid Services
• Pennsylvania Insurance Department
• HealthCare.gov

Let’s see how an Assignment of Benefits helps a child named Mia. Mia is 7 years old and has Down syndrome . Her parents use an AOB to streamline her therapy payments.

• Medical Services: Mia receives speech therapy sessions.
• Using AOB: Mia’s parents sign an AOB, allowing the therapist to bill the insurance company directly.
• Direct Payment: The insurance company pays the therapist directly, reducing out-of-pocket expenses for Mia’s family.
• Continuous Care: The therapist receives timely payments, ensuring Mia’s therapy sessions continue without interruption.

This arrangement helps Mia get the consistent care she needs without financial stress for her family.

Sponsored by - Goally

An Assignment of Benefits (AOB) simplifies payments for services your child needs. Here’s how it works:

• Transferring Rights: Parents sign an AOB to transfer insurance claim rights to the provider.
• Direct Billing: The provider bills the insurance company directly.
• Receiving Payment: The insurance company pays the provider directly, not the parents.
• Ensuring Care: Timely payments ensure continuous care for the child.

Using an Assignment of Benefits ensures that kids with special needs receive uninterrupted care by simplifying the payment process for medical and therapeutic services.

Emotional Regulation

My Child is Stimming When Excited | Not Autism

January 10, 2024

Emotional Dysregulation Autism

June 8, 2023

Why Would a Child Need Occupational Therapy?

June 27, 2023

What Is Working Memory & How Does It Relate t...

What Is Working Memory & How Does It Relate to Autism?

November 22, 2023

Company info

Media requests

Our Services

Terms Of use

Privacy Policy

Our Website

Neurodiversopedia

Privacy Overview

Assignment of benefits: A growing concern

By Kevin Poll

Evaluating claims properly and determining the appropriate amount of a loss are crucial for insurance companies, especially when trying to offer competitive premiums to customers and maintain profitable financial results.

Factors that affect profitability

In the business of insurance, many factors—some that can’t be controlled—affect financial profitability. Predictive analytics and more refined modeling are helping insurers reduce uncertainty, but even the best of models have their limitations.

Further, many variables can’t be predicted but could have significant financial impact on the bottom line. One of those variables—the potential for the benefits of an insurance policy being assigned post-loss to predatory adjusters—has been a hot topic, particularly in those states where laws and regulations currently prevent insurance companies from being able to mitigate the problem.

What is assignment of benefits?

Typically, an insurance policy has a loss payment provision that advises the policyholder that any payment for a first-party loss will be paid directly to the insured unless another party is legally entitled to collect payment. However, a common practice by consumers after a loss is to have the contractor that will be making the repairs to the damaged property work directly with the insurance company for payment.

Some insurance providers have simplified this process by developing a network of trusted contractors that are allowed to inspect claims on their behalf. This creates a consumer-friendly environment where the insured, for the most part, is removed from the claims settlement process. However, consumers generally are free to make other choices, so if they decide on a contractor not in that network, the insurer most likely will work with the entity selected by the insured.

When a contractor, who is not in an insurance provider’s network, is chosen, the insured has two options: either receive payment from the insurance company and then work directly with the contractor or allow the contractor to work directly with the insurance company regarding repairs and payment. Insurance companies would likely prefer the first option because they can then more closely monitor the claims process. While the second option may be less desirable to the insurance company, certain states, like Florida, have laws in place that actually prevent the carrier from disallowing it.

What are the concerns with assignment of benefits?

Transferring the benefits of a policy to a third party, such as a contractor, does create a better customer experience; however, insurers generally lose a bit of control managing the claims process when working directly with the third party.

Several states (especially Florida as discussed below) have seen an influx in predatory public adjusters and contractors that seek out consumers who may potentially have a loss covered by their homeowners policy. These adjusters (that may also serve as the contractor making the repairs to the home) will have the consumer sign a transfer of benefits to them almost immediately after suffering the loss, and then they will work directly with the insurance company to complete the claims process.

One issue that arises (and often the consumer is unaware of this) is that the adjuster/contractor could be inflating the actual cost of the claim by reporting damage that may not actually have occurred. Additionally, the claim may not be reported to the insurance company until the repairs have already been completed so the insurance company has not had an opportunity to inspect the damage. Such tactics can result in additional profits for the adjuster/contractor, which translates to inflated severity and rising premiums for the consumer.

This issue may be particularly problematic in Florida, where insurance carriers may not be aware of potential losses until they’re served with a lawsuit for expenses incurred by the contractor that completed the repairs. In fact, the Florida Office of Insurance Regulation (FLOIR) released results from a study it conducted showing that the number of lawsuits attributed to assignment of benefits (AOB) increased from 408 in 2000 to more than 28,000 in 2016. Further, the average severity for claims where there is an AOB is about 85 percent more than those claims without an AOB.

How has this issue escalated?

Several factors have contributed to the growing problem of assignment of benefits in Florida; however, a combination of case law and legislation, which has made it difficult for insurance companies to mitigate claim costs and potential fraud, may be the most impactful.

In the 1917 landmark case of West Florida Grocery Co. v. Teutonia Fire Ins. Co., 77 So. 209, 210-, the state Supreme Court rendered a decision holding that the insured was able to assign the benefits of the policy following a loss directly to a third party without the written consent of the insurance provider. The precedent established by this 100-year-old case continues to make it very difficult for an insurance company to prohibit the assignment of benefits in Florida.

In addition to this case, Florida Statute §627.428 governing payment of attorneys’ fees related to insurance practices requires that insurance companies pay legal fees to third parties successfully suing to obtain payment for their services even if the ruling from the court places the amount of the claim only $1 above the insurance company’s offer in settlement. As a result, this statute incentivizes contractors to sue insurance companies for reimbursement, because the likelihood that they’ll have to pay their own legal fees for the case is very slim.

As reported by The Sun Sentinel earlier this year, consumers in southern Florida could expect to see rate increases averaging 5-15% as a result of claims abuse. Additionally, if it can be assumed that a significant number of the lawsuits complied in the FLOIR study referenced above were initiated by public adjusters and contractors seeking to be unjustly compensated, it could be suggested that this predatory behavior is factoring into these rate increases.

Despite this potential correlation, the legislature has yet to make changes to existing laws. While some members of Florida’s legislature favor the existing legislation, others are advocating for consumers and supporting legislation that would eliminate the abuse. Although remedial legislation did fail in 2017, some members have said they’re hopeful to get legislation passed in 2018.

How is ISO responding?

ISO has been reviewing policy language to determine the best course of action for responding to the growing crisis, especially in Florida. While prohibiting assignment of benefits post-loss altogether is not allowed by state law, several policy provisions can be modified to introduce parameters on how the benefits of the policy can be assigned to a third party. ISO is finalizing these changes and hopes to file in the first quarter of 2018 so that member companies can address this concern with or without any future changes to Florida law.

• Personal Property
• Risk Assessment
• Homeowners Underwriting

• Received a document?

Assignment of Benefits for Contractors: Pros & Cons of Accepting an AOB

22 articles

Insurance , Restoration , Slow Payment

When a property owner files an insurance claim to cover a restoration or roofing project, the owner typically deals directly with the insurance company. They may not have the funds available to pay the contractor out of pocket, so they’re counting on that insurance check to cover the construction costs.

But insurance companies often drag their feet, and payments can take even longer than normal. Contractors often wish they could simply deal with the insurance company directly through an assignment of benefits. In some circumstances, an AOB can be an effective tool that helps contractors collect payment faster — but is it worth it?

In this article, we’ll explain what an assignment of benefits is, and how the process works. More importantly, we’ll look at the pros and cons for restoration and roofing contractors to help you decide if an AOB is worth it . 

What is an assignment of benefits? 

An assignment of benefits , or AOB, is an agreement to transfer insurance claim rights to a third party. It gives the assignee authority to file and negotiate a claim directly with the insurance company, without involvement from the property owner. 

An AOB also allows the insurer to pay the contractor directly instead of funneling funds through the customer. AOBs take the homeowner out of the claims equation.

Here’s an example: A property owner’s roof is damaged in a hurricane. The owner contacts a restoration company to repair the damage, and signs an AOB to transfer their insurance rights to the contractor. The contractor, now the assignee, negotiates the claim directly with the insurance company. The insurer will pay the claim by issuing a check for the repairs directly to the restoration contractor. 

Setting up an AOB

A property owner and contractor can set up an assignment of benefits in two steps: 

• The owner and the contractor sign an AOB agreement
• The contractor sends the AOB to the insurance company

Keep in mind that many states have their own laws about what the agreement can or should include .

For example, Florida’s assignment of benefits law contains relatively strict requirements when it comes to an assignment of benefits: 

• The AOB agreements need to be in writing. The agreement must contain a bolded disclosure notifying the customer that they are relinquishing certain rights under the homeowners policy. You can’t charge administrative fees or penalties if a homeowner decides to cancel the AOB. 
• The AOB must include an itemized, per-unit breakdown of the work you plan to do. The services can only involve how you plan to make repairs or restore the home’s damage or protect the property from any further harm. A copy must be provided to the insurance company. 
• A homeowner can rescind an AOB agreement within 14 days of signing, or within 30 days if no work has begun and no start date was listed for the work. If a start date is listed, the 30-day rule still applies if substantial progress has not been made on the job. 

Before signing an AOB agreement, make sure you understand the property owner’s insurance policy, and whether the project is likely to be covered.

Learn more: Navigating an insurance claim on a restoration project

Pros & cons for contractors

It’s smart to do a cost-benefit analysis on the practice of accepting AOBs. Listing pros and cons can help you make a logical assessment before deciding either way. 

Pro: Hiring a public adjuster

An insurance carrier’s claims adjuster will inspect property damage and arrive at a dollar figure calculated to cover the cost of repairs. Often, you might feel this adjuster may have overlooked some details that should factor into the estimate. 

If you encounter pushback from the insurer under these circumstances, a licensed, public adjuster may be warranted. These appraisers work for the homeowner, whose best interests you now represent as a result of the AOB. A public adjuster could help win the battle to complete the repairs properly. 

Pro: More control over payment

You may sink a considerable amount of time into preparing an estimate for a customer. You may even get green-lighted to order materials and get started. Once the ball starts rolling, you wouldn’t want a customer to back out on the deal. 

Klark Brown , Co-founder of The Alliance of Independent Restorers, concedes this might be one of the very situations in which an AOB construction agreement might help a contractor. “An AOB helps make sure the homeowner doesn’t take the insurance money and run,” says Brown.  

Pro: Build a better relationship with the homeowner

A homeowner suffers a substantial loss and it’s easy to understand why push and pull with an insurance company might be the last thing they want to undertake. They may desire to have another party act on their behalf. 

As an AOB recipient, the claims ball is now in your court. By taking some of the weight off a customer’s shoulders during a difficult period, it could help build good faith and further the relationship you strive to build with that client. 

Learn more : 8 Ways for Contractors to Build Trust With a Homeowner

Con: It confuses payment responsibilities

Even if you accept an AOB, the property owner still generally bears responsibility for making payment. If the insurance company is dragging their feet, a restoration contractor can still likely file a mechanics lien on the property .

A homeowner may think that by signing away their right to an insurance claim, they are also signing away their responsibility to pay for the restoration work. This typically isn’t true, and this expectation could set you up for a more contentious dispute down the line if there is a problem with the insurance claim. 

Con: Tighter margins

Insurance companies will want repairs made at the lowest cost possible. Just like you, carriers run a business and need to cut costs while boosting revenue. 

While some restoration contractors work directly with insurers and could get a steady stream of work from them, Brown emphasizes that you may be sacrificing your own margins. “Expect to accept work for less money than you’d charge independently,” he adds. 

The takeaway here suggests that any contractor accepting an AOB could subject themselves to the same bare-boned profit margins. 

Con: More administrative work

Among others, creating additional administrative busywork is another reason Brown recommends that you steer clear of accepting AOBs. You’re committing additional resources while agreeing to work for less money. 

“Administrative costs are a burden,” Brown states. Insurers may reduce and/or delay payments to help their own bottom lines. “Insurers will play the float with reserves and claims funds,” he added. So, AOBs can be detrimental to your business if you’re spending more while chasing payments. 

Con: Increase in average collection period

Every contractor should use some financial metrics to help gauge the health of the business . The average collection period for receivables measures the average time it takes you to get paid on your open accounts. 

Insurance companies aren’t known for paying claims quickly. If you do restoration work without accepting an AOB, you can often take action with the homeowner to get paid faster. When you’re depending on an insurance company to make your payment, rather than the owner, collection times will likely increase.

The literal and figurative bottom line is: If accepting assignment of benefits agreements increases the time it takes to get paid and costs you more in operational expense, these are both situations you want to avoid. 

Learn more: How to calculate your collection effectiveness 

AOBs and mechanics liens

A mechanics lien is hands down a contractor’s most effective tool to ensure they get paid for their work. Many types of restoration services are protected under lien laws in most states. But what happens to lien rights when a contractor accepts an assignment of benefits? 

An AOB generally won’t affect a contractor’s ability to file a mechanics lien on the property if they don’t receive payment. The homeowner is typically still responsible to pay for the improvements. This is especially true if the contract involves work that wasn’t covered by the insurance policy. 

However, make sure you know the laws in the state where your project is located. For example, Florida’s assignment of benefits law, perhaps the most restrictive in the country, appears to prohibit an AOB assignee from filing a lien. 

Florida AOB agreements are required to include language that waives the contractor’s rights to collect payment from the owner. The required statement takes it even further, stating that neither the contractor or any of their subs can file a mechanics lien on the owner’s property. 

On his website , Florida’s CFO says: “The third-party assignee and its subcontractors may not collect, or attempt to collect money from you, maintain any action of law against you, file a lien against your property or report you to a credit reporting agency.”

That sounds like a contractor assignee can’t file a lien if they aren’t paid . But, according to construction lawyer Alex Benarroche , it’s not so cut-and-dry.

“Florida’s AOB law has yet to be tested in court, and it’s possible that the no-lien provision would be invalid,” says Benarroche. “This is because Florida also prohibits no-lien clauses in a contract. It is not legal for a contractor to waive their right to file a lien via an agreement prior to performance.” 

Learn more about no-lien clauses and their enforceability state-by-state

Remember that every state treats AOBs differently, and conflicting laws can create additional risk. It’s important to consult with a construction lawyer in the project’s state before accepting an assignment of benefits. 

Best practices for contractors 

At the end of the day, there are advantages and disadvantages to accepting an assignment of benefits. While it’s possible in some circumstances that an AOB could help a contractor get paid faster, there are lots of other payment tools that are more effective and require less administrative costs. An AOB should never be the first option on the table . 

If you do decide to become an assignee to the property owner’s claim benefits, make sure you do your homework beforehand and adopt some best practices to effectively manage the assignment of benefits process. You’ll need to keep on top of the administrative details involved in drafting AOBs and schedule work in a timely manner to stay in compliance with the conditions of the agreement. 

Make sure you understand all the nuances of how insurance works when there’s a claim . You need to understand the owner’s policy and what it covers. Home insurance policy forms are basically standardized for easy comparisons in each state, so what you see with one company is what you get with all carriers. 

Since you’re now the point of contact for the insurance company, expect more phone calls and emails from both clients and the insurer . You’ll need to have a strategy to efficiently handle ramped-up communications since the frequency will increase. Keep homeowners and claims reps in the loop so you can build customer relationships and hopefully get paid faster by the insurer for your work.

I am doing some part-time administrative work for a friend who has an owner/operator pressure washing business located in NC in its first year of business. Recently, my friend has expressed interest in expanding his operations to FL so that he can eventually live and work between both...

I am a homeowner, 4 days prior to Ida, we had solar panels installed. Half were damaged and blown off of course, so after we allowed the solar panel co to do our roof and redo our panel system. After a year, they finally replaced our roof and...

I believe a person was impersonating as a licensed general contractor. When I verified the license in GA, the license belonged to a completely different individual. When I called the provided insurance carrier of the general contractor, the insurance company said the company did not have an active...

Thomas Tracy

View Profile

About the author

Recommended for you

Construction punch lists explained.

Punch list work might seem minor, but it has an improportionate impact on payment. Without getting punch work out of...

What Is Underbilling? | Construction Industry Accounting

Underbilling occurs when a contractor does not bill for all the labor and materials delivered in a billing cycle. It...

The Ultimate Guide to Lien Waivers in Construction

What are lien waivers in construction? This article is the ultimate guide for construction lien waivers including essential information and...

Do I Have to Sign a Lien Waiver to Get Paid?

Lien waivers are an important part of optimizing construction payment. Property owners and GCs rely on waivers to manage the...

Guide to Alternative Dispute Resolution (ADR) in Construction

With a proper dispute resolution clause in place, contractors, subs, and suppliers can avoid taking their disputes into litigation.

What Is a Notice of Commencement? Your Guide with Form Downloads

Typically, the filing of a notice of commencement by the property owner or other top-of-chain party affects preliminary notice and...

What Is a Work in Progress Schedule? | Construction Accounting

The Work In Progress (WIP) schedule is an accounting schedule that's a component of a company's balance sheet. It's calculated...

Construction Contracts: Pros and Cons of a Cost-Plus Contract

What is a cost-plus contract and how is it used in the construction industry? This type of contract is also...

Search NAIC

Recommended.

Back to Newsroom

Consumer Insight

Sept. 13, 2023

Assignment of Benefits: Consumer Beware

You've just survived a severe storm, or a tornado and you've experienced some extensive damage to your home that requires repairs, including the roof. Your contractor is now asking for your permission to speak with your insurance company using an Assignment of Benefits. Before you sign, read the fine print. Otherwise, you may inadvertently sign over your benefits and any extra money you’re owed as part of your claim settlement.

The National Association of Insurance Commissioners (NAIC) offers information to help you better understand insurance, your risk and what to do in the event you need repairs after significant storm damage.

Be cautious about signing an Assignment of Benefits. An Assignment of Benefits, or an AOB, is an agreement signed by a policyholder that allows a third party—such as a water extraction company, a roofer or a plumber—to act on behalf of the insured and seek direct payment from the insurance company.  An AOB can be a useful tool for getting repairs done, as it allows the repair company to deal directly with your insurance company when negotiating repairs and issuing payment directly to the repair company. However, an AOB is a legal contract, so you need to understand what rights you are signing away and you need to be sure the repair company is trustworthy.

• With an Assignment of Benefits, the third party, like a roofing company or plumber, files your claim, makes the repair decision and collects insurance payments without your involvement.
• Once you have signed an AOB, the insurer only communicates with the third party and the other party can sue your insurer and you can lose your right to mediation.
• It's possible the third party may demand a higher claim payment than the insurer offers and then sue the insurer when it denies your claim.
• You are not required to sign an AOB to have repairs completed. You can file a claim directly with your insurance company, which allows you to maintain control of the rights and benefits provided by your policy in resolving the claim.

Be on alert for fraud. Home repair fraud is common after a natural disaster. Contractors often come into disaster-struck regions looking to make quick money by taking advantage of victims.

• It is a good idea to do business with local or trusted companies. Ask friends and family for references.
•  Your insurer may also have recommendations or a list of preferred contractors.
• Always get more than one bid on work projects. Your adjuster may want to review estimates before you make repairs.

Immediately after the disaster, have an accurate account of the damage for your insurance company when you file a claim.

• Before removing any debris or belongings, document all losses.
• Take photos or video and make a list of the damages and lost items.
• Save damaged items if possible so your insurer can inspect them, some insurance companies may have this as a requirement in their policy.

Most insurance companies have a time requirement for reporting a claim, so contact your agent or company as soon as possible. Your  state insurance department  can help you find contact information for your insurance company, if you cannot find it.

• Insurance company officials can help you determine what damages are covered, start your claim and even issue a check to start the recovery process.
• When reporting losses, you will need insurance information, current contact information and a  home inventory or list of damaged and lost property . If you do not have a list, the adjuster will give you some time to make one. Ask the adjuster how much time you have to submit this inventory list. The NAIC Post Disaster Claims Guide has details on what you can do if you do not have a home inventory list.

After you report damage to your insurance company, they will send a claims adjuster to assess the damage at no cost to you . An adjuster from your insurance company will walk through and around your home to inspect damaged items and temporary repairs you may have made.

• A public adjuster is different from an adjuster from your insurance company and has no ties to the insurance company.
• They estimate the damage to your home and property, review your insurance coverage, and negotiate a settlement of the insurance claim for you.
• Many states require public adjusters to be licensed. Some states prohibit public adjusters from negotiating insurance claims for you. In those states, only a licensed attorney can represent you.
• You have to pay a public adjuster.
• The NAIC Post Disaster Claims Guide has information on the different types of adjusters.

Once the adjuster has completed an assessment, they will provide documentation of the loss to your insurer to determine your claims settlement. When it comes to getting paid, you may receive more than one check. If the damage is severe or you are displaced from your home, the first check may be an emergency advance. Other payments may be for the contents of your home, other personal property, and structural damages. Please note that if there is a mortgage on your home, the payment for structural damage may be payable to you and your mortgage lender. Lenders may put that money into an escrow account and pay for repairs as the work is completed.

More information. States have rules governing how insurance companies handle claims. If you think that your insurer is not responding in a timely manner or completing a reasonable investigation of your claim, contact your  state insurance department .

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.

Assignment of benefits

Assignment of benefits is a legal agreement where a patient authorizes their healthcare provider to receive direct payment from the insurance company for services rendered.

Boost patient experience and your bottom line by automating patient cost estimates, payer underpayment detection, and contract optimization in one place.

What is Assignment of Benefits?

Assignment of benefits (AOB) is a crucial concept in the healthcare revenue cycle management (RCM) process. It refers to the legal transfer of the patient's rights to receive insurance benefits directly to the healthcare provider. In simpler terms, it allows healthcare providers to receive payment directly from the insurance company, rather than the patient being responsible for paying the provider and then seeking reimbursement from their insurance company.

Understanding Assignment of Benefits

When a patient seeks medical services, they typically have health insurance coverage that helps them pay for the cost of their healthcare. In most cases, the patient is responsible for paying a portion of the bill, known as the copayment or deductible, while the insurance company covers the remaining amount. However, in situations where the patient has assigned their benefits to the healthcare provider, the provider can directly bill the insurance company for the services rendered.

The assignment of benefits is a legal agreement between the patient and the healthcare provider. By signing this agreement, the patient authorizes the healthcare provider to receive payment directly from the insurance company on their behalf. This ensures that the provider receives timely payment for the services provided, reducing the financial burden on the patient.

Difference between Assignment of Benefits and Power of Attorney

While the assignment of benefits may seem similar to a power of attorney (POA) in some respects, they are distinct legal concepts. A power of attorney grants someone the authority to make decisions and act on behalf of another person, including financial matters. On the other hand, an assignment of benefits only transfers the right to receive insurance benefits directly to the healthcare provider.

In healthcare, a power of attorney is typically used in situations where a patient is unable to make decisions about their medical care. It allows a designated individual, known as the healthcare proxy, to make decisions on behalf of the patient. In contrast, an assignment of benefits is used to streamline the payment process between the healthcare provider and the insurance company.

Examples of Assignment of Benefits

To better understand how assignment of benefits works, let's consider a few examples:

Sarah visits her primary care physician for a routine check-up. She has health insurance coverage through her employer. Before the appointment, Sarah signs an assignment of benefits form, authorizing her physician to receive payment directly from her insurance company. After the visit, the physician submits the claim to the insurance company, and they reimburse the physician directly for the covered services.

John undergoes a surgical procedure at a hospital. He has health insurance coverage through a private insurer. Prior to the surgery, John signs an assignment of benefits form, allowing the hospital to receive payment directly from his insurance company. The hospital submits the claim to the insurance company, and they reimburse the hospital for the covered services. John is responsible for paying any copayments or deductibles directly to the hospital.

Mary visits a specialist for a specific medical condition. She has health insurance coverage through a government program. Mary signs an assignment of benefits form, granting the specialist the right to receive payment directly from the government program. The specialist submits the claim to the program, and they reimburse the specialist for the covered services. Mary is responsible for any applicable copayments or deductibles.

In each of these examples, the assignment of benefits allows the healthcare provider to receive payment directly from the insurance company, simplifying the billing and reimbursement process for both the provider and the patient.

Assignment of benefits is a fundamental concept in healthcare revenue cycle management. It enables healthcare providers to receive payment directly from the insurance company, reducing the financial burden on patients and streamlining the billing process. By understanding the assignment of benefits, patients can make informed decisions about their healthcare and ensure that their providers receive timely payment for the services rendered.

Get paid in full by bringing clarity to your revenue cycle

Related terms, medicare code editor (mce).

Medicare Code Editor (MCE) is a software tool used in healthcare revenue cycle management to validate Medicare claims based on coding guidelines.

Coinsurance

Coinsurance is the percentage of healthcare costs that a patient is responsible for paying after meeting their deductible, in addition to the amount covered by their insurance.

Subscribe to the 

 Healthcare Clarified newsletter

Get the latest insights on RCM and healthcare policy in your inbox

National Safety Month promotion: Save 25% on the AARP Smart Driver online course. You could even save on auto insurance!

AARP daily Crossword Puzzle

Hotels with AARP discounts

Life Insurance

AARP Dental Insurance Plans

AARP MEMBERSHIP 

AARP Membership — $12 for your first year when you sign up for Automatic Renewal

Get instant access to members-only products, hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Find how much you can save in a year with a membership.  Learn more.

• right_container

Work & Jobs

Social Security

AARP en Español

• Membership & Benefits

AARP Rewards

• AARP Rewards %{points}%

Conditions & Treatments

Drugs & Supplements

Health Care & Coverage

Health Benefits

Staying Fit

Your Personalized Guide to Fitness

Get Happier

Creating Social Connections

Brain Health Resources

Tools and Explainers on Brain Health

Your Health

8 Major Health Risks for People 50+

Scams & Fraud

Personal Finance

Money Benefits

View and Report Scams in Your Area

AARP Foundation Tax-Aide

Free Tax Preparation Assistance

AARP Money Map

Get Your Finances Back on Track

How to Protect What You Collect

Small Business

Age Discrimination

Flexible Work

Freelance Jobs You Can Do From Home

AARP Skills Builder

Online Courses to Boost Your Career

31 Great Ways to Boost Your Career

ON-DEMAND WEBINARS

Tips to Enhance Your Job Search

Get More out of Your Benefits

When to Start Taking Social Security

10 Top Social Security FAQs

Social Security Benefits Calculator

Medicare Made Easy

Original vs. Medicare Advantage

Enrollment Guide

Step-by-Step Tool for First-Timers

Prescription Drugs

9 Biggest Changes Under New Rx Law

Medicare FAQs

Quick Answers to Your Top Questions

Care at Home

Financial & Legal

Life Balance

LONG-TERM CARE

​Understanding Basics of LTC Insurance​

State Guides

Assistance and Services in Your Area

Prepare to Care Guides

How to Develop a Caregiving Plan

End of Life

How to Cope With Grief, Loss

Recently Played

Word & Trivia

Atari® & Retro

Members Only

Staying Sharp

Mobile Apps

More About Games

Right Again! Trivia

Right Again! Trivia – Sports

Atari® Video Games

Throwback Thursday Crossword

Travel Tips

Vacation Ideas

Destinations

Travel Benefits

Outdoor Vacation Ideas

Camping Vacations

Plan Ahead for Summer Travel

AARP National Park Guide

Discover Canyonlands National Park

History & Culture

8 Amazing American Pilgrimages

Entertainment & Style

Family & Relationships

Personal Tech

Home & Living

Celebrities

Beauty & Style

Movies for Grownups

Summer Movie Preview

Jon Bon Jovi’s Long Journey Back

Looking Back

50 World Changers Turning 50

Sex & Dating

Spice Up Your Love Life

Friends & Family

How to Host a Fabulous Dessert Party

Home Technology

Caregiver’s Guide to Smart Home Tech

Virtual Community Center

Join Free Tech Help Events

Create a Hygge Haven

Soups to Comfort Your Soul

AARP Solves 25 of Your Problems

Driver Safety

Maintenance & Safety

Trends & Technology

AARP Smart Guide

How to Clean Your Car

We Need To Talk

Assess Your Loved One's Driving Skills

AARP Smart Driver Course

Building Resilience in Difficult Times

Tips for Finding Your Calm

Weight Loss After 50 Challenge

Cautionary Tales of Today's Biggest Scams

7 Top Podcasts for Armchair Travelers

Jean Chatzky: ‘Closing the Savings Gap’

Quick Digest of Today's Top News

AARP Top Tips for Navigating Life

Get Moving With Our Workout Series

You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.

Go to Series Main Page

What is Medicare assignment and how does it work?

Kimberly Lankford,

​Because Medicare decides how much to pay providers for covered services, if the provider agrees to the Medicare-approved amount, even if it is less than they usually charge, they’re accepting assignment.

A doctor who accepts assignment agrees to charge you no more than the amount Medicare has approved for that service. By comparison, a doctor who participates in Medicare but doesn’t accept assignment can potentially charge you up to 15 percent more than the Medicare-approved amount.

That’s why it’s important to ask if a provider accepts assignment before you receive care, even if they accept Medicare patients. If a doctor doesn’t accept assignment, you will pay more for that physician’s services compared with one who does.

Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Find out how much you could save in a year with a membership.  Learn more.

How much do I pay if my doctor accepts assignment?

If your doctor accepts assignment, you will usually pay 20 percent of the Medicare-approved amount for the service, called coinsurance, after you’ve paid the annual deductible. Because Medicare Part B covers doctor and outpatient services, your $240 deductible for Part B in 2024 applies before most coverage begins.

All providers who accept assignment must submit claims directly to Medicare, which pays 80 percent of the approved cost for the service and will bill you the remaining 20 percent. You can get some preventive services and screenings, such as mammograms and colonoscopies , without paying a deductible or coinsurance if the provider accepts assignment. 

What if my doctor doesn’t accept assignment?

A doctor who takes Medicare but doesn’t accept assignment can still treat Medicare patients but won’t always accept the Medicare-approved amount as payment in full.

This means they can charge you up to a maximum of 15 percent more than Medicare pays for the service you receive, called “balance billing.” In this case, you’re responsible for the additional charge, plus the regular 20 percent coinsurance, as your share of the cost.

How to cover the extra cost? If you have a Medicare supplement policy , better known as Medigap, it may cover the extra 15 percent, called Medicare Part B excess charges.

All Medigap policies cover Part B’s 20 percent coinsurance in full or in part. The F and G policies cover the 15 percent excess charges from doctors who don’t accept assignment, but Plan F is no longer available to new enrollees, only those eligible for Medicare before Jan. 1, 2020, even if they haven’t enrolled in Medicare yet. However, anyone who is enrolled in original Medicare can apply for Plan G.

Remember that Medigap policies only cover excess charges for doctors who accept Medicare but don’t accept assignment, and they won’t cover costs for doctors who opt out of Medicare entirely.

Good to know. A few states limit the amount of excess fees a doctor can charge Medicare patients. For example, Massachusetts and Ohio prohibit balance billing, requiring doctors who accept Medicare to take the Medicare-approved amount. New York limits excess charges to 5 percent over the Medicare-approved amount for most services, rather than 15 percent.

AARP NEWSLETTERS

%{ newsLetterPromoText  }%

%{ description }%

Privacy Policy

ARTICLE CONTINUES AFTER ADVERTISEMENT

How do I find doctors who accept assignment?

Before you start working with a new doctor, ask whether he or she accepts assignment. About 98 percent of providers billing Medicare are participating providers, which means they accept assignment on all Medicare claims, according to KFF.

You can get help finding doctors and other providers in your area who accept assignment by zip code using Medicare’s Physician Compare tool .

Those who accept assignment have this note under the name: “Charges the Medicare-approved amount (so you pay less out of pocket).” However, not all doctors who accept assignment are accepting new Medicare patients.

AARP® Vision Plans from VSP™

Exclusive vision insurance plans designed for members and their families

What does it mean if a doctor opts out of Medicare?

Doctors who opt out of Medicare can’t bill Medicare for services you receive. They also aren’t bound by Medicare’s limitations on charges.

In this case, you enter into a private contract with the provider and agree to pay the full bill. Be aware that neither Medicare nor your Medigap plan will reimburse you for these charges.

In 2023, only 1 percent of physicians who aren’t pediatricians opted out of the Medicare program, according to KFF. The percentage is larger for some specialties — 7.7 percent of psychiatrists and 4.2 percent of plastic and reconstructive surgeons have opted out of Medicare.

Keep in mind

These rules apply to original Medicare. Other factors determine costs if you choose to get coverage through a private Medicare Advantage plan . Most Medicare Advantage plans have provider networks, and they may charge more or not cover services from out-of-network providers.

Before choosing a Medicare Advantage plan, find out whether your chosen doctor or provider is covered and identify how much you’ll pay. You can use the Medicare Plan Finder to compare the Medicare Advantage plans and their out-of-pocket costs in your area.

Return to Medicare Q&A main page

Kimberly Lankford is a contributing writer who covers Medicare and personal finance. She wrote about insurance, Medicare, retirement and taxes for more than 20 years at  Kiplinger’s Personal Finance  and has written for  The Washington Post  and  Boston Globe . She received the personal finance Best in Business award from the Society of American Business Editors and Writers and the New York State Society of CPAs’ excellence in financial journalism award for her guide to Medicare.

Discover AARP Members Only Access

Already a Member? Login

More on Medicare

How Do I Create a Personal Online Medicare Account?

You can do a lot when you decide to look electronically

I Got a Medicare Summary Notice in the Mail. What Is It?

This statement shows what was billed, paid in past 3 months

Understanding Medicare’s Options: Parts A, B, C and D

Making sense of the alphabet soup of health care choices

Recommended for You

AARP Value & Member Benefits

Learn, earn and redeem points for rewards with our free loyalty program

AARP® Dental Insurance Plan administered by Delta Dental Insurance Company

Dental insurance plans for members and their families

The National Hearing Test

Members can take a free hearing test by phone

AARP® Staying Sharp®

Activities, recipes, challenges and more with full access to AARP Staying Sharp®

SAVE MONEY WITH THESE LIMITED-TIME OFFERS

• [email protected]

(888) 444-6041

What is Assignment of Benefits in Medical Billing

The health care industry has a wide network of health care insurance payers that make payments on behalf of patients having insurance plans. Without insurance plans, many patients would not be able to seek medical services. Whenever a patient visits a doctor for the treatment he/she needs to ensure that the insurance payer makes the payment for all the medical benefits he/she may have received. This is where the assignment of benefits comes in.

Definition of Assignment of Benefits

The term assignment of benefits (AOB) may be referred to as an agreement that transfers the health insurance claims benefits of the policy from the patient to the health care provider. This agreement is signed by the patient as a request to pay the designated amount to the health care provider for the health benefits he/she may have received. On the patient’s request the insurance payer makes the payment to the hospital/doctor.

Understanding of Assignment of Benefits

The assignment of benefits is generally transferred by designing a legal document— for which, the format  may vary across medical offices. This document is called the ‘Assignment of Benefits’ form. While signing the form, the patient also authorizes the insurance company to release any and all written information that is required by the hospital for reimbursement purposes. This also means that any medical billing and collection company hired by the hospital is free to use the released information for billing purposes. In addition to this, the patient agrees to appoint anyone from the hospital as a representative on his/her behalf to seek payment from the insurance payer. In other words, once the document has been signed, the patient is no longer required to deal directly with the insurance company or its representative, unless asked to do so.

It is important to note that the assignment of benefits occurs only when a claim has been successfully processed with the insurance company/payer. However, the insurance company may not always honor and accept the request for AOB. The acceptance or rejection of AOB depends on the patient’s or member’s health benefits contract and/or the State Law. Therefore all three parties— patient, health care provider, and the insurance company must stay updated with the State Law and also, review the patient’s health benefit plan thoroughly. This will help in saving time and unnecessary paperwork if the chances of the insurance company rejecting the AOB seem to be high.

Following are some providers or medical services that use AOB:

• Ambulance services.
• Ambulatory surgical center services.
• Clinical diagnostic laboratory services.
• Biological(s) and drugs.
• Home dialysis equipment and supplies.
• Physician services for patients having Medicare and Medicaid plans.
• Services of medical professionals other than a primary physician, including certified registered nurse anesthetists, clinical nurse specialists, clinical psychologists, clinical social workers, nurse midwives, nurse practitioners, and physician assistants.
• Simplified billing roster for vaccines, such as— influenza virus and pneumococcal.

AOB plays an important role in medical billing by establishing direct contact with the patient’s health care insurance payer. The purpose is to increase the chances of reimbursement and accelerate the process without contacting the patient additionally..

Popular Blog

Want to learn more about our solutions?

Connect with us.

• (888) 444 6041
• 3838 N Sam Houston Pkwy E. Suite 430 Houston, TX. 77032

Get in Touch

• Practice Areas
• Terminology
• Entrepreneurship
• Medical Billing
• Healthcare Conferences

What is Assignment of Benefits in Medical Billing?

An assignment of benefits is the act of signing documentation authorizing a health insurance company to pay a physician directly. In other words, the insurance company can pay claims without the direct involvement of the patient in the process. There are other situations where AOBs can be helpful, but we’ll focus on their use in relation to medical benefits.

If there isn’t an assignment of benefits agreement in place, the patient would be responsible for paying the other party directly from their own pocket, then filing a claim with their insurance provider to receive reimbursement. This could be time-consuming and costly, especially if the patient has no idea how to file a claim.

The document is typically signed by patients when they undergo medical procedures. The purpose of this form is to assign the responsibility of payment for any future medical bills that may arise after the procedure. It’s important to note that not all procedures require an AOB.

An assignment of benefits agreement might be utilized to pay a medical practitioner the patient didn’t choose, like an anesthesiologist. The patient may have picked a surgeon, but an anesthesiologist assigned on the day of the procedure might issue a separate bill. They’re, in essence, signing that anyone involved in their treatment can receive direct payment from the insurance carrier. It doesn’t have to go through the patient.

This document can also eliminate service fees surrounding processing. As a result, the patient can focus on medical treatment and recovery without being bogged down with the complexities of paying medical bills. The overall intent of an assignment of benefits agreement is to make the process more manageable for the patient, as they don’t need to haggle directly with their insurer.

List of Providers and Services

When the patient signs an AOB agreement, they give a third party right to obtain payment for services the provider performed, and medical billing services are a prime example of where they may sign an AOB agreement.

• Ambulance services
• Medical insurance claims
• Drugs and pharmaceuticals
• Diagnostic and clinical lab services
• Emergency surgical center services
• Dialysis supplies and equipment used in the home
• Physician services for Medicare and Medicaid patients

Services of professionals other than a primary care physician, which includes:

• Physician assistants
• Clinical nurse specialists
• Clinical social workers
• Clinical psychologists
• Certified registered nurse anesthetists

Information Commonly Requested on Assignment of Benefits Form:

• Signature of patient or person legally responsible
• Signature of parent or legal guardian

How AOBs Affect the Medical Practitioner

A medical provider or their administrative staff may feel overwhelmed by the sheer number of forms patients must fill out prior to treatment. Demanding more paperwork from patients may be seen as an added burden on the managerial staff, as well as the patient. However, getting a signed AOB is vital in preserving the interests of everyone involved.

In addition to receiving direct payment from the insurance company without needing to go through the patient, a signed assignment of benefits form will help medical providers appeal denied and underpaid claims. They can ask that payments be made directly to them rather than through the patient. This makes the process more manageable for both the doctors and the patient.

Things to Bear in Mind

The patient gives their rights and benefits to third parties under their current health plan. Depending on the wording in the AOB, their insurer may not be allowed to contact them directly about their claims. In addition, the patient may be unable to negotiate settlements or approve payments on their behalf and enable third parties to endorse checks on behalf of the patient. Finally, when the patient signs an AOB, the insurer may sue the third parties involved in the dispute.

Looking for a qualified medical billing service?

By taking just 1 minute to provide some basic information about your practice, you can get up to 5 pre-screened companies competing for your business.

Related Posts

What Is Cosmetic Dermatology? Your Guide to Treatments, Costs, and More

What is a clia number in medical billing, healthcare revenue cycle management explained, leave a reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

• Top Courses
• Online Degrees
• Find your New Career
• Join for Free

What Is Effective Communication? Skills for Work, School, and Life

Discover how improving your communication skills can benefit your career, education, and personal life.

Communication is a part of everyday life, whether we communicate in person or on the countless digital platforms available to us. But how much of our communication actually reaches the intended audience or person the way we hoped? Effective communication requires us to be clear and complete in what we are trying to express.

Being an effective communicator in our professional and personal lives involves learning the skills to exchange information with clarity, empathy, and understanding. In this article, we’ll define what effective communication looks like, discuss its benefits, and offer ways to improve your communication skills.

What is effective communication?

Effective communication is the process of exchanging ideas, thoughts, opinions, knowledge, and data so that the message is received and understood with clarity and purpose. When we communicate effectively, both the sender and receiver feel satisfied.

Communication occurs in many forms, including verbal and non-verbal, written, visual, and listening. It can occur in person, on the internet (on forums, social media, and websites), over the phone (through apps, calls, and video), or by mail.

For communication to be effective, it must be clear , correct , complete , concise , and compassionate . We consider these to be the 5 Cs of communication, though they may vary depending on who you’re asking. 

While the effectiveness of communication can be difficult to measure, its impact is hard to deny. According to one study, surveyed companies in the United States and United Kingdom with at least 100,000 employees lost $62.4 million per year on average due to poor communication. On the flip side, companies led by effective communicators had nearly 50 percent higher total returns to shareholders over companies with less effective communicators at the helm [ 1 ].

Build job-ready skills with a Coursera Plus subscription

• Get access to 7,000+ learning programs from world-class universities and companies, including Google, Yale, Salesforce, and more
• Try different courses and find your best fit at no additional cost
• Earn certificates for learning programs you complete
• A subscription price of $59/month, cancel anytime

Benefits of effective communication

The benefits of communication effectiveness can be witnessed in the workplace, in an educational setting, and in your personal life. Learning how to communicate well can be a boon in each of these areas.

In the workplace, effective communication can help you: 

Manage employees and build teams

Grow your organization more rapidly and retain employees

Benefit from enhanced creativity and innovation

Become a better public speaker

Build strong relationships and attract more opportunities for you or your organization

Read more: Why Is Workplace Communication Important? + How to Improve It

In your personal life, effective communication can lead to:

Improved social, emotional, and mental health

Deeper connections with people you care about

New bonds based on trust and transparency

Better problem–solving and conflict resolution skills

Say it with your body

In face-to-face conversation, body language plays an important role. Communication is 55 percent non-verbal, 38 percent vocal (tone and inflection), and 7 percent words, according to Albert Mehrabian, a researcher who pioneered studies on body language [ 2 ]. Up to 93 percent of communication, then, does not involve what you are actually saying. 

Positive body language is open—your posture is upright and receptive, your palms are open, you lean in when speaking or listening, and nod encouragingly. Negative body language can include biting your lip nervously, looking bored, crossing your arms, putting your hands on your hips, or tapping your foot impatiently.

How to improve your communication skills

Communication, like any other skill, is one you can improve upon with practice. Here are a few ways to start improving your communication skills, whether at home or on the job.

1. Consider your audience.

Who are you communicating with? Make sure you are aware of your audience—those you intend to communicate with may differ from those who actually receive your messages. Knowing your audience can be key to delivering the right messages effectively. Their age, race, ethnicity, gender, marital status, income, education level, subject knowledge, and professional experience can all affect how they’ll receive your message. 

If you’re advertising a fast food restaurant, for example, you might want to deliver your message to an audience that’s likely to be hungry. This could be a billboard on the side of a busy highway that shows a giant cheeseburger and informs drivers that the closest location is just two miles away. 

Or suppose you’re announcing your engagement to your family. You might host a gathering afterwards to celebrate, send them photos of the engagement in a group chat, surprise them in conversation over dinner, or tag your family members in your announcement on social media. Your chosen form of communication will depend on your family dynamics.

2. Practice active listening.

Active listening is the practice of giving your full attention in a communication exchange. 

Some techniques include paying attention to body language, giving encouraging verbal cues, asking questions, and practicing non-judgment. Before executing your communication, be sure to consider your audience and practice active listening to get to the heart of their needs and desires. This way, you can improve your communication as a counselor, social worker, marketer, professor, colleague, or friend. 

Here are some examples of active listening in practice:

If you work in marketing, you might engage in social listening to gather consumer data on social media platforms like Instagram and TikTok. 

If you are a professor, you might take advantage of end-of-semester feedback forms and act on your students' needs by hosting one-on-one meetings during office hours. Likewise, your students might choose to participate in discussions after your lecture or at least sit attentively and ask questions.

If you are a team leader, you might read Slack messages from your teammates, gauge that they are frustrated with the workload, and respond by resetting priorities for the next few weeks. This communicates to the team that their voices are heard.

If you are a parent, you might have a disagreement with your child about finishing their homework, but if you probe deeper with open communication, they may confess that their teacher made a discouraging comment that left them unmotivated.

Read more: What Is Active Listening and How Can You Improve This Key Skill?

3. Make your message as clear as possible.

Once you have successfully identified your audience and listened to their intentions, needs, and desires, you may have something to communicate. To do this effectively, turn to the 5 Cs of communication to ensure your message is:

Compassionate

Prepare to communicate in a way that achieves most of these characteristics.

4. Use the right medium or platform.

Using the right medium or platform to communicate matters. Effective communication requires you to consider whether you need to meet in person or if Zoom would suffice. Is your message casual enough to use WhatsApp, or would a formal email be more efficient and thorough? If you are catching up with a friend, do you two prefer to talk on the phone or via old-fashioned letters? Whatever you choose should be intuitive and appropriate for you and your current situation.

You might assess the priority level and the type of communication needed. In a marketing campaign, is there a visual component on Instagram or is it a spoken podcast ad? Will the platform be a Facebook post, product placement in a film, or a printed poster hung in cafes? For a university lecture, do students prefer to be online or meet in person? Will there be a discussion afterward, and would it be fruitful to conduct it in a pub, cafe, or in a field outdoors? 

By considering your audience, practicing active listening, clarifying your communication, and choosing the right medium or environment, you are well on your way to exercising communication effectiveness.

Effective communication starts here

Start building better communication with Improving your Communication Skills from the University of Pennsylvania, Successful Negotiation: Essential Strategies and Skills from the University of Michigan, or Effective Communication: Writing, Design, and Presentation from the University of Colorado Boulder. 

Article sources

PRovoke Media. " The Cost Of Poor Communications , https://www.provokemedia.com/latest/article/the-cost-of-poor-communications." Accessed January 17, 2024.

The University of Texas Permian Basin. " How Much of Communication Is Nonverbal? , https://online.utpb.edu/about-us/articles/communication/how-much-of-communication-is-nonverbal/." Accessed January 17, 2024.

Keep reading

Coursera staff.

Editorial Team

Coursera’s editorial team is comprised of highly experienced professional editors, writers, and fact...

This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

What you pay for Medicare will vary based on what coverage and services you get, and what providers you visit. What are my coverage options?

There's no yearly limit on what you pay out-of-pocket, unless you have supplemental coverage, like a Medicare Supplement Insurance (Medigap) policy, or you join a Medicare Advantage Plan .

What’s a premium, deductible, coinsurance, or copayment?

Part A (Hospital Insurance) costs

Part B (Medical Insurance) costs

Medicare Advantage Plan (Part C) costs

Where can I get more cost details from my plan?

Learn more about Medicare Advantage Plans.

Part D (Drug Coverage) costs

Learn more about Part D.

Medicare Supplemental Insurance (Medigap)

Learn more about Medigap and its costs.

What do you want to do next?

• Next Step: Get help with costs
• Take Action: Talk to someone
• Get details: Learn about the parts of Medicare

• More from M-W
• To save this word, you'll need to log in. Log In

Definition of benefit

 (Entry 1 of 2)

Definition of benefit  (Entry 2 of 2)

transitive verb

intransitive verb

Examples of benefit in a Sentence

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'benefit.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

Word History

Noun and Verb

Middle English, from Anglo-French benfet , from Latin bene factum , from neuter of bene factus , past participle of bene facere

14th century, in the meaning defined at sense 4

15th century, in the meaning defined at transitive sense

Phrases Containing benefit

benefit of clergy

• child benefit
• cost - benefit
• death benefit
• for one's benefit
• for one's own benefit
• fringe benefit
• have the benefit of
• of benefit to
• sickness benefit
• the benefit of the doubt
• to one's benefit
• without (the) benefit of
• with the benefit of

Dictionary Entries Near benefit

beneficium separationis

Cite this Entry

“Benefit.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/benefit. Accessed 13 Jun. 2024.

Kids Definition

Kids definition of benefit.

Kids Definition of benefit  (Entry 2 of 2)

Middle English benefet, benefit "good deed," derived from Latin bene factum (same meaning), from bene factus, past participle of bene facere "to do good," from bene "well" (akin to bonus "good") and facere "to do, make" — related to bonus , fashion

Legal Definition

Legal definition of benefit.

Note: In proceedings for a partial taking for the purpose of a public improvement, the condemning authority may use a special benefit to the remaining land as a set-off against the landowner's damages for the taking.

Note: The heir obtains the benefit of inventory by having a qualified public officer (as a notary public) make an inventory of the assets in the estate within the time period set by statute.

More from Merriam-Webster on benefit

Nglish: Translation of benefit for Spanish Speakers

Britannica English: Translation of benefit for Arabic Speakers

Britannica.com: Encyclopedia article about benefit

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

Can you solve 4 words at once?

Word of the day.

See Definitions and Examples »

Get Word of the Day daily email!

Popular in Grammar & Usage

More commonly misspelled words, commonly misspelled words, how to use em dashes (—), en dashes (–) , and hyphens (-), absent letters that are heard anyway, how to use accents and diacritical marks, popular in wordplay, the words of the week - june 7, 9 superb owl words, 'gaslighting,' 'woke,' 'democracy,' and other top lookups, 10 words for lesser-known games and sports, your favorite band is in the dictionary, games & quizzes.

Constructivism Learning Theory & Philosophy of Education

Saul Mcleod, PhD

Editor-in-Chief for Simply Psychology

BSc (Hons) Psychology, MRes, PhD, University of Manchester

Saul Mcleod, PhD., is a qualified psychology teacher with over 18 years of experience in further and higher education. He has been published in peer-reviewed journals, including the Journal of Clinical Psychology.

Learn about our Editorial Process

Olivia Guy-Evans, MSc

Associate Editor for Simply Psychology

BSc (Hons) Psychology, MSc Psychology of Education

Olivia Guy-Evans is a writer and associate editor for Simply Psychology. She has previously worked in healthcare and educational sectors.

On This Page:

Constructivism is a learning theory that emphasizes the active role of learners in building their own understanding. Rather than passively receiving information, learners reflect on their experiences, create mental representations , and incorporate new knowledge into their schemas . This promotes deeper learning and understanding.

Constructivism is ‘an approach to learning that holds that people actively construct or make their own knowledge and that reality is determined by the experiences of the learner’ (Elliott et al., 2000, p. 256).

In elaborating on constructivists’ ideas, Arends (1998) states that constructivism believes in the personal construction of meaning by the learner through experience and that meaning is influenced by the interaction of prior knowledge and new events.

Constructivism Philosophy

Knowledge is constructed rather than innate, or passively absorbed.

Constructivism’s central idea is that human learning is constructed, that learners build new knowledge upon the foundation of previous learning.

This prior knowledge influences what new or modified knowledge an individual will construct from new learning experiences (Phillips, 1995).

Learning is an active process.

The second notion is that learning is an active rather than a passive process.

The passive view of teaching views the learner as ‘an empty vessel’ to be filled with knowledge, whereas constructivism states that learners construct meaning only through active engagement with the world (such as experiments or real-world problem-solving).

Information may be passively received, but understanding cannot be, for it must come from making meaningful connections between prior knowledge, new knowledge, and the processes involved in learning.

John Dewey valued real-life contexts and problems as an educational experience. He believed that if students only passively perceive a problem and do not experience its consequences in a meaningful, emotional, and reflective way, they are unlikely to adapt and revise their habits or construct new habits, or will only do so superficially.

All knowledge is socially constructed.

Learning is a social activity – it is something we do together, in interaction with each other, rather than an abstract concept (Dewey, 1938).

For example, Vygotsky (1978) believed that community plays a central role in the process of “making meaning.” For Vygotsky, the environment in which children grow up will influence how they think and what they think about.

Thus, all teaching and learning is a matter of sharing and negotiating socially constituted knowledge.

For example, Vygotsky (1978) states cognitive development stems from social interactions from guided learning within the zone of proximal development as children and their partners co-construct knowledge.

All knowledge is personal.

Each individual learner has a distinctive point of view, based on existing knowledge and values.

This means that same lesson, teaching or activity may result in different learning by each pupil, as their subjective interpretations differ.

This principle appears to contradict the view the knowledge is socially constructed.

Fox (2001, p. 30) argues:

• Although individuals have their own personal history of learning, nevertheless they can share in common knowledge, and
• Although education is a social process powerfully influenced by cultural factors, cultures are made up of sub-cultures, even to the point of being composed of sub-cultures of one.
• Cultures and their knowledge base are constantly in a process of change and the knowledge stored by individuals is not a rigid copy of some socially constructed template. In learning a culture, each child changes that culture.

Learning exists in the mind.

The constructivist theory posits that knowledge can only exist within the human mind, and that it does not have to match any real-world reality (Driscoll, 2000).

Learners will be constantly trying to develop their own individual mental model of the real world from their perceptions of that world.

As they perceive each new experience, learners will continually update their own mental models to reflect the new information, and will, therefore, construct their own interpretation of reality.

Types of Constructivism

Typically, this continuum is divided into three broad categories: Cognitive constructivism, based on the work of Jean Piaget ; social constructivism, based on the work of Lev Vygotsky; and radical constructivism.

According to the GSI Teaching and Resource Center (2015, p.5):

Cognitive constructivism states knowledge is something that is actively constructed by learners based on their existing cognitive structures. Therefore, learning is relative to their stage of cognitive development.

Cognitivist teaching methods aim to assist students in assimilating new information to existing knowledge, and enabling them to make the appropriate modifications to their existing intellectual framework to accommodate that information.

According to social constructivism, learning is a collaborative process, and knowledge develops from individuals” interactions with their culture and society.

Social constructivism was developed by Lev Vygotsky (1978, p. 57), who suggested that:

Every function in the child’s cultural development appears twice: first, on the social level and, later on, on the individual level; first, between people (interpsychological) and then inside the child (intrapsychological).

The notion of radical constructivism was developed by Ernst von Glasersfeld (1974) and states that all knowledge is constructed rather than perceived through senses.

Learners construct new knowledge on the foundations of their existing knowledge. However, radical constructivism states that the knowledge individuals create tells us nothing about reality, and only helps us to function in your environment. Thus, knowledge is invented not discovered.

Radical constructivism also argues that there is no way to directly access an objective reality, and that knowledge can only be understood through the individual’s subjective interpretation of their experiences.

This theory asserts that individuals create their own understanding of reality, and that their knowledge is always incomplete and subjective.

The humanly constructed reality is all the time being modified and interacting to fit ontological reality, although it can never give a ‘true picture’ of it. (Ernest, 1994, p. 8)

Constructivism Teaching Philosophy

Constructivist learning theory underpins a variety of student-centered teaching methods and techniques which contrast with traditional education, whereby knowledge is simply passively transmitted by teachers to students.

What is the role of the teacher in a constructivist classroom?

Constructivism is a way of teaching where instead of just telling students what to believe, teachers encourage them to think for themselves. This means that teachers need to believe that students are capable of thinking and coming up with their own ideas. Unfortunately, not all teachers believe this yet in America.

The primary responsibility of the teacher is to create a collaborative problem-solving environment where students become active participants in their own learning.

From this perspective, a teacher acts as a facilitator of learning rather than an instructor.

The teacher makes sure he/she understands the students” preexisting conceptions, and guides the activity to address them and then build on them (Oliver, 2000).

Scaffolding is a key feature of effective teaching, where the adult continually adjusts the level of his or her help in response to the learner’s level of performance.

In the classroom, scaffolding can include modeling a skill, providing hints or cues, and adapting material or activity (Copple & Bredekamp, 2009).

What are the features of a constructivist classroom?

A constructivist classroom emphasizes active learning, collaboration, viewing a concept or problem from multiple perspectives, reflection, student-centeredness, and authentic assessment to promote meaningful learning and help students construct their own understanding of the world.

Tam (2000) lists the following four basic characteristics of constructivist learning environments, which must be considered when implementing constructivist teaching strategies:

1) Knowledge will be shared between teachers and students. 2) Teachers and students will share authority. 3) The teacher’s role is one of a facilitator or guide. 4) Learning groups will consist of small numbers of heterogeneous students.

What are the pedagogical (i.e., teaching) goals of constructivist classrooms?

Honebein (1996) summarizes the seven pedagogical goals of constructivist learning environments:

• To provide experience with the knowledge construction process (students determine how they will learn).
• To provide experience in and appreciation for multiple perspectives (evaluation of alternative solutions).
• To embed learning in realistic contexts (authentic tasks).
• To encourage ownership and a voice in the learning process (student-centered learning).
• To embed learning in social experience (collaboration).
• To encourage the use of multiple modes of representation, (video, audio text, etc.)
• To encourage awareness of the knowledge construction process (reflection, metacognition).

Brooks and Brooks (1993) list twelve descriptors of constructivist teaching behaviors:

• Encourage and accept student autonomy and initiative. (p. 103)
• Use raw data and primary sources, along with manipulative, interactive, and physical materials. (p. 104)
• When framing tasks, use cognitive terminology such as “classify,” analyze,” “predict,” and “create.” (p. 104)
• Allow student responses to drive lessons, shift instructional strategies, and alter content. (p. 105)
• Inquire about students’ understandings of the concepts before sharing [your] own understandings of those concepts. (p. 107)
• Encourage students to engage in dialogue, both with the teacher and with one another. (p. 108)
• Encourage student inquiry by asking thoughtful, open-ended questions and encouraging students to ask questions of each other. (p. 110)
• Seek elaboration of students’ initial responses. (p. 111)
• Engage students in experiences that might engender contradictions to their initial hypotheses and then encourage discussion. (p. 112)
• Allow wait time after posing questions. (p. 114)
• Provide time for students to construct relationships and create metaphors. (p. 115)
• Nurture students’ natural curiosity through frequent use of the learning cycle model. (p. 116)

Critical Evaluation

Constructivism promotes a sense of personal agency as students have ownership of their learning and assessment.

The biggest disadvantage is its lack of structure. Some students require highly structured learning environments to be able to reach their potential.

It also removes grading in the traditional way and instead places more value on students evaluating their own progress, which may lead to students falling behind, as without standardized grading teachers may not know which students are struggling.

Summary Tables

What is constructivism in the philosophy of education?

Constructivism in the philosophy of education is the belief that learners actively construct their own knowledge and understanding of the world through their experiences, interactions, and reflections.

It emphasizes the importance of learner-centered approaches, hands-on activities, and collaborative learning to facilitate meaningful and authentic learning experiences.

How would a constructivist teacher explain 1/3÷1/3?

They might engage students in hands-on activities, such as using manipulatives or visual representations, to explore the concept visually and tangibly.

The teacher would encourage discussions among students, allowing them to share their ideas and perspectives, and guide them toward discovering the relationship between dividing by a fraction and multiplying by its reciprocal.

Through guided questioning, the teacher would facilitate critical thinking and help students arrive at the understanding that dividing 1/3 by 1/3 is equivalent to multiplying by the reciprocal, resulting in a value of 1.

Arends, R. I. (1998). Resource handbook. Learning to teach (4th ed.). Boston, MA: McGraw-Hill.

Brooks, J., & Brooks, M. (1993). In search of understanding: the case for constructivist classrooms, ASCD. NDT Resource Center database .

Copple, C., & Bredekamp, S. (2009). Developmentally appropriate practice in early childhood programs . Washington, DC: National Association for the Education of Young Children.

Dewey, J. (1938) Experience and Education . New York: Collier Books.

Driscoll, M. (2000). Psychology of Learning for Instruction . Boston: Allyn& Bacon

Elliott, S.N., Kratochwill, T.R., Littlefield Cook, J. & Travers, J. (2000). Educational psychology: Effective teaching, effective learning (3rd ed.) . Boston, MA: McGraw-Hill College.

Ernest, P. (1994). Varieties of constructivism: Their metaphors, epistemologies and pedagogical implications. Hiroshima Journal of Mathematics Education, 2 (1994), 2.

Fox, R. (2001). Constructivism examined . Oxford review of education, 27(1) , 23-35.

Honebein, P. C. (1996). Seven goals for the design of constructivist learning environments. Constructivist learning environments : Case studies in instructional design, 11-24.

Oliver, K. M. (2000). Methods for developing constructivism learning on the web. Educational Technology, 40 (6)

Phillips, D. C. (1995). The good, the bad, and the ugly: The many faces of constructivism . Educational researcher, 24 (7), 5-12.

Tam, M. (2000). Constructivism, Instructional Design, and Technology: Implications for Transforming Distance Learning. Educational Technology and Society, 3 (2).

Teaching Guide for GSIs. Learning: Theory and Research (2016). Retrieved from http://gsi.berkeley.edu/media/Learning.pdf

von Glasersfeld, E. V. (1974). Piaget and the radical constructivist epistemology . Epistemology and education , 1-24.

von Glasersfeld, E. (1994). A radical constructivist view of basic mathematical concepts. Constructing mathematical knowledge: Epistemology and mathematics education, 5-7.

Von Glasersfeld, E. (2013).  Radical constructivism  (Vol. 6). Routledge.

Vygotsky, L. S. (1978). Mind in society: The development of higher psychological processes . Cambridge, MA: Harvard University Press.

Further Reading

Constructivist Teaching Methods

Constructivism Learning Theory: A Paradigm for Teaching and Learning Strategies Which Can be Implemented by Teachers When Planning Constructivist Opportunities in the Classroom

Related Articles

Child Psychology

Vygotsky vs. Piaget: A Paradigm Shift

Interactional Synchrony

Internal Working Models of Attachment

Learning Theory of Attachment

Stages of Attachment Identified by John Bowlby And Schaffer & Emerson (1964)

Child Psychology , Personality

How Anxious Ambivalent Attachment Develops in Children

Jurisdiction E - Medicare Part B

California, Hawaii, Nevada, American Samoa, Guam, Northern Mariana Islands

• Noridian Medicare Portal (NMP) Login

Assignment of Benefits - JE Part B

Browse by Topic

• Advance Beneficiary Notice of Noncoverage (ABN)
• Clinical Trials
• Compliance Program
• Documentation Requirements
• Drugs, Biologicals and Injections
• Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)
• Electronic Data Interchange (EDI)
• Emergencies and Disasters
• Fraud and Abuse
• Home Health
• Incentive Programs
• Incident To
• Medicare Secondary Payer (MSP)
• Non-Covered Services
• Noridian Medicare Portal (NMP)
• Overpayment and Recoupment
• Preventive Services
• Promoting Equity
• Remittance Advice (RA)

Assignment of Benefits

Assignment of benefits is not authorization to submit claims.

It is important to note that the beneficiary signature requirements for submission of claims are separate and distinct from assignment of benefits requirements except where the beneficiary died before signing the request for payment for a service furnished by a supplier and the supplier accepts assignment for that service. Specifically, the beneficiary signature requirements for submission of claims must be met for all Part A and Part B claims and apply to both provider and supplier claims, whereas the assignment of benefits requirements apply to providers and must be met to authorize Medicare to pay the provider rather than the beneficiary. In addition, the beneficiary does not need to assign benefits in any circumstance where assignment is mandatory. Thus, in most cases, a signed assignment of benefits is not needed.

CMS Internet Only Manual, Publication 100-04, Medicare Claims Processing Manual, Chapter 1, Section 50.1.6

© 2024 Noridian Healthcare Solutions, LLC Terms & Privacy

End User Agreements for Providers

Some of the Provider information contained on the Noridian Medicare web site is copyrighted by the American Medical Association, the American Dental Association, and/or the American Hospital Association. This includes items such as CPT codes, CDT codes, ICD-10 and other UB-04 codes.

Before you can enter the Noridian Medicare site, please read and accept an agreement to abide by the copyright rules regarding the information you find within this site. If you choose not to accept the agreement, you will return to the Noridian Medicare home page.

THE LICENSES GRANTED HEREIN ARE EXPRESSLY CONDITIONED UPON YOUR ACCEPTANCE OF ALL TERMS AND CONDITIONS CONTAINED IN THESE AGREEMENTS. BY CLICKING ABOVE ON THE LINK LABELED "I Accept", YOU HEREBY ACKNOWLEDGE THAT YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS AND CONDITIONS SET FORTH IN THESE AGREEMENTS.

IF YOU DO NOT AGREE WITH ALL TERMS AND CONDITIONS SET FORTH HEREIN, CLICK ABOVE ON THE LINK LABELED "I Do Not Accept" AND EXIT FROM THIS COMPUTER SCREEN.

IF YOU ARE ACTING ON BEHALF OF AN ORGANIZATION, YOU REPRESENT THAT YOU ARE AUTHORIZED TO ACT ON BEHALF OF SUCH ORGANIZATION AND THAT YOUR ACCEPTANCE OF THE TERMS OF THESE AGREEMENTS CREATES A LEGALLY ENFORCEABLE OBLIGATION OF THE ORGANIZATION. AS USED HEREIN, "YOU" AND "YOUR" REFER TO YOU AND ANY ORGANIZATION ON BEHALF OF WHICH YOU ARE ACTING.

LICENSE FOR USE OF "PHYSICIANS' CURRENT PROCEDURAL TERMINOLOGY", (CPT) FOURTH EDITION

End User/Point and Click Agreement:

CPT codes, descriptions and other data only are copyright 2002-2020 American Medical Association (AMA). All Rights Reserved. CPT is a trademark of the AMA.

You, your employees and agents are authorized to use CPT only as contained in the following authorized materials: Local Coverage Determinations (LCDs), training material, publications, and Medicare guidelines, internally within your organization within the United States for the sole use by yourself, employees and agents. Use is limited to use in Medicare, Medicaid, or other programs administered by the Centers for Medicare and Medicaid Services (CMS). You agree to take all necessary steps to ensure that your employees and agents abide by the terms of this agreement. You acknowledge that the AMA holds all copyright, trademark, and other rights in CPT.

Any use not authorized herein is prohibited, including by way of illustration and not by way of limitation, making copies of CPT for resale and/or license, transferring copies of CPT to any party not bound by this agreement, creating any modified or derivative work of CPT, or making any commercial use of CPT. License to use CPT for any use not authorized here in must be obtained through the AMA, CPT Intellectual Property Services, 515 N. State Street, Chicago, IL 60610. Applications are available at the AMA Web site, https://www.ama-assn.org .

This product includes CPT which is commercial technical data and/or computer data bases and/or commercial computer software and/or commercial computer software documentation, as applicable which were developed exclusively at private expense by the American Medical Association, 515 North State Street, Chicago, Illinois, 60610. U.S. Government rights to use, modify, reproduce, release, perform, display, or disclose these technical data and/or computer data bases and/or computer software and/or computer software documentation are subject to the limited rights restrictions of DFARS 252.227-7015(b)(2)(June 1995) and/or subject to the restrictions of DFARS 227.7202-1(a)(June 1995) and DFARS 227.7202-3(a)June 1995), as applicable for U.S. Department of Defense procurements and the limited rights restrictions of FAR 52.227-14 (June 1987) and/or subject to the restricted rights provisions of FAR 52.227-14 (June 1987) and FAR 52.227-19 (June 1987), as applicable, and any applicable agency FAR Supplements, for non-Department Federal procurements.

AMA Disclaimer of Warranties and Liabilities CPT is provided "as is" without warranty of any kind, either expressed or implied, including but not limited to, the implied warranties of merchantability and fitness for a particular purpose. The AMA warrants that due to the nature of CPT, it does not manipulate or process dates, therefore there is no Year 2000 issue with CPT. The AMA disclaims responsibility for any errors in CPT that may arise as a result of CPT being used in conjunction with any software and/or hardware system that is not Year 2000 compliant. No fee schedules, basic unit, relative values or related listings are included in CPT. The AMA does not directly or indirectly practice medicine or dispense medical services. The responsibility for the content of this file/product is with Noridian Healthcare Solutions or the CMS and no endorsement by the AMA is intended or implied. The AMA disclaims responsibility for any consequences or liability attributable to or related to any use, non-use, or interpretation of information contained or not contained in this file/product.

CMS Disclaimer The scope of this license is determined by the AMA, the copyright holder. Any questions pertaining to the license or use of the CPT must be addressed to the AMA. End Users do not act for or on behalf of the CMS. The CMS DISCLAIMS RESPONSIBILITY FOR ANY LIABILITY ATTRIBUTABLE TO END USER USE OF THE CPT. The CMS WILL NOT BE LIABLE FOR ANY CLAIMS ATTRIBUTABLE TO ANY ERRORS, OMISSIONS, OR OTHER INACCURACIES IN THE INFORMATION OR MATERIAL CONTAINED ON THIS PAGE. In no event shall CMS be liable for direct, indirect, special, incidental, or consequential damages arising out of the use of such information or material.

This license will terminate upon notice to you if you violate the terms of this license. The AMA is a third-party beneficiary to this license.

LICENSE FOR USE OF "CURRENT DENTAL TERMINOLOGY", ("CDT")

End User/Point and Click Agreement

These materials contain Current Dental Terminology, (CDT), copyright © 2020 American Dental Association (ADA). All rights reserved. CDT is a trademark of the ADA.

1. Subject to the terms and conditions contained in this Agreement, you, your employees, and agents are authorized to use CDT only as contained in the following authorized materials and solely for internal use by yourself, employees and agents within your organization within the United States and its territories. Use of CDT is limited to use in programs administered by Centers for Medicare & Medicaid Services (CMS). You agree to take all necessary steps to ensure that your employees and agents abide by the terms of this agreement. You acknowledge that the ADA holds all copyright, trademark and other rights in CDT. You shall not remove, alter, or obscure any ADA copyright notices or other proprietary rights notices included in the materials.

2. Any use not authorized herein is prohibited, including by way of illustration and not by way of limitation, making copies of CDT for resale and/or license, transferring copies of CDT to any party not bound by this agreement, creating any modified or derivative work of CDT, or making any commercial use of CDT. License to use CDT for any use not authorized herein must be obtained through the American Dental Association, 211 East Chicago Avenue, Chicago, IL 60611. Applications are available at the American Dental Association web site, http://www.ADA.org .

3. Applicable Federal Acquisition Regulation Clauses (FARS)\Department of Defense Federal Acquisition Regulation Supplement (DFARS) Restrictions Apply to Government use. Please click here to see all U.S. Government Rights Provisions .

4. ADA DISCLAIMER OF WARRANTIES AND LIABILITIES. CDT is provided "as is" without warranty of any kind, either expressed or implied, including but not limited to, the implied warranties of merchantability and fitness for a particular purpose. No fee schedules, basic unit, relative values or related listings are included in CDT. The ADA does not directly or indirectly practice medicine or dispense dental services. The sole responsibility for the software, including any CDT and other content contained therein, is with (insert name of applicable entity) or the CMS; and no endorsement by the ADA is intended or implied. The ADA expressly disclaims responsibility for any consequences or liability attributable to or related to any use, non-use, or interpretation of information contained or not contained in this file/product. This Agreement will terminate upon notice to you if you violate the terms of this Agreement. The ADA is a third-party beneficiary to this Agreement.

5. CMS DISCLAIMER. The scope of this license is determined by the ADA, the copyright holder. Any questions pertaining to the license or use of the CDT should be addressed to the ADA. End users do not act for or on behalf of the CMS. CMS DISCLAIMS RESPONSIBILITY FOR ANY LIABILITY ATTRIBUTABLE TO END USER USE OF THE CDT. CMS WILL NOT BE LIABLE FOR ANY CLAIMS ATTRIBUTABLE TO ANY ERRORS, OMISSIONS, OR OTHER INACCURACIES IN THE INFORMATION OR MATERIAL COVERED BY THIS LICENSE. In no event shall CMS be liable for direct, indirect, special, incidental, or consequential damages arising out of the use of such information or material.

LICENSE FOR NATIONAL UNIFORM BILLING COMMITTEE ("NUBC")

Point and Click American Hospital Association Copyright Notice

Copyright © 2021, the American Hospital Association, Chicago, Illinois. Reproduced with permission. No portion of the AHA copyrighted materials contained within this publication may be copied without the express written consent of the AHA. AHA copyrighted materials including the UB-04 codes and descriptions may not be removed, copied, or utilized within any software, product, service, solution or derivative work without the written consent of the AHA. If an entity wishes to utilize any AHA materials, please contact the AHA at 312-893-6816

Making copies or utilizing the content of the UB-04 Manual or UB-04 Data File, including the codes and/or descriptions, for internal purposes, resale and/or to be used in any product or publication; creating any modified or derivative work of the UB-04 Manual and/or codes and descriptions; and/or making any commercial use of UB-04 Manual / Data File or any portion thereof, including the codes and/or descriptions, is only authorized with an express license from the American Hospital Association.

To obtain comprehensive knowledge about the UB-04 codes, the Official UB-04 Data Specification Manual is available for purchase on the American Hospital Association Online Store . To license the electronic data file of UB-04 Data Specifications, contact AHA at (312) 893-6816. You may also contact AHA at [email protected] .

Consent to Monitoring

Warning: you are accessing an information system that may be a U.S. Government information system. If this is a U.S. Government information system, CMS maintains ownership and responsibility for its computer systems. Users must adhere to CMS Information Security Policies, Standards, and Procedures. For U.S. Government and other information systems, information accessed through the computer system is confidential and for authorized users only. By continuing beyond this notice, users consent to being monitored, recorded, and audited by company personnel. Unauthorized or illegal use of the computer system is prohibited and subject to criminal and civil penalties. The use of the information system establishes user's consent to any and all monitoring and recording of their activities.

Note: The information obtained from this Noridian website application is as current as possible. There are times in which the various content contributor primary resources are not synchronized or updated on the same time interval.

This warning banner provides privacy and security notices consistent with applicable federal laws, directives, and other federal guidance for accessing this Government system, which includes all devices/storage media attached to this system. This system is provided for Government authorized use only. Unauthorized or improper use of this system is prohibited and may result in disciplinary action and/or civil and criminal penalties. At any time, and for any lawful Government purpose, the government may monitor, record, and audit your system usage and/or intercept, search and seize any communication or data transiting or stored on this system. Therefore, you have no reasonable expectation of privacy. Any communication or data transiting or stored on this system may be disclosed or used for any lawful Government purpose.

Explore Jobs

• Jobs Near Me
• Remote Jobs
• Full Time Jobs
• Part Time Jobs
• Entry Level Jobs
• Work From Home Jobs

Find Specific Jobs

• $15 Per Hour Jobs
• $20 Per Hour Jobs
• Hiring Immediately Jobs
• High School Jobs
• H1b Visa Jobs

Explore Careers

• Business And Financial
• Architecture And Engineering
• Computer And Mathematical

Explore Professions

• What They Do
• Certifications
• Demographics

Best Companies

• Health Care
• Fortune 500

Explore Companies

• CEO And Executies
• Resume Builder
• Career Advice
• Explore Majors
• Questions And Answers
• Interview Questions

What Is A Comprehensive Benefits Package? (With Examples)

• Paid Time Off Policy (PTO)
• Leave of Absence Policy
• What Are Floating Holidays?
• What Are Employer-Paid Holidays?
• How Does Holiday Pay Work
• How Does A Stipend Work
• Cash a Paycheck Without a Bank Account
• What Is Compensatory Time?
• What's Unlimited Vacation?
• What Is A Commission?
• What Is A Mileage Deduction?
• Semimonthly Vs Biweekly Pay Schedules
• Flexible Spending Account
• Stock Options At Job
• Benefits Package
• Overtime Pay
• Workers Comp
• What Is Fmla
• Tuition Reimbursement
• Discretionary Vs. Non-Discretionary Bonus
• What Are Union Benefits
• What Is An HRA Account
• What Is Cobra Insurance

Find a Job You Really Want In

When it comes to deciding how attractive a job offer is, salary plays a pivotal role. But savvy job-seekers know that base salary , while important, is just one piece in the decision-making process . To get a complete picture of what your employment contract is worth, you also have to look at what benefits the employer offers.

In this article, we’ll go over common elements of a comprehensive benefits package, legally required benefits, and extra benefits that are growing in popularity.

Key Takeaways:

A comprehensive benefits package provides an employee with policies and services that ensure their financial well-being and health.

Some benefits are mandatory due to laws, including the Family and Medical Leave Act (FMLA), minimum wage, and worker’s compensation.

Although the federal government mandates certain benefit protections, many are determined by state governments. This causes significant variation between states.

Optional benefits, such as schedule flexibility and retirement plans, are determined by the employer.

It is important to review benefits packages before accepting a position of employment.

What Is an Employee Benefits Package?

Mandatory benefits, optional benefits, employee benefits package tips, final thoughts.

• Sign Up For More Advice and Jobs

An employee benefits package is the set of policies and services that an employer provides for the sake of their employees’ mental and physical well-being, financial security , and family needs. This package makes up a part of an employee’s total compensation.

Most large companies and almost all government employers provide comprehensive employee benefits packages. Small businesses typically offer fewer benefits than large ones, but there are still mandatory benefits that all employers must offer.

Businesses have significant leeway in determining what benefits to offer their employees. Creating an attractive company culture and retaining top-talent require an organization to offer generous benefits to employees at every level of the company.

Before we get into the fun and trendy benefits some employers offer, let’s first discuss the benefits that the law mandates. Note that some states have more stringent laws regarding benefits than federal guidelines set out, so be sure to check your state’s laws for items on this list.

In general, state laws will only serve to bolster benefits that are already federally mandated:

Family and Medical Leave Act (FMLA) . The FMLA states that employers with more than 50 employees must provide up to 12 workweeks of unpaid leave during any 12-month period for specified family and medical reasons . These weeks needn’t be consecutive, and they also needn’t be paid.

However, California , New York, New Jersey , and Rhode Island require paid parental leave under certain conditions – check with your state government for further information.

When the employee wishes to return to work, the employer must provide the same job or a similar position with equal pay and benefits as before they left. Health insurance benefits remain in place for the duration of the leave.

For an employee to be eligible to take this leave , they must have worked for at least 1,250 hours over the past year. Employees can take this leave for the following reasons:

Maternity or paternity leave (30% of companies offer paid paternity leave, while 34% offer paid maternity leave, as per a study by SHRM )

To care for an immediate family member with a medical condition

To deal with a personal medical issue that prevents work

To take care of an emergency regarding an active military family member

Minimum wage. Covered by the Fair Labor Standards Act (FLSA) , the federal government mandates a minimum wage of $7.25/hour.

Overtime. According to the FLSA, nonexempt employees must be paid at least time and a half (1.5x normal hourly wage) for each hour they work over 40 hours in a workweek. Again, state guidelines can be more generous to the employee, so check your local laws for more exact information.

Unemployment. Unemployment benefits are handled solely at the state level, and there’s a wide discrepancy between what some states offer employees (and in what situations) as opposed to others.

Consolidated Omni-Budget Reconciliation Act (COBRA). All employers with 20+ employees must continue providing medical benefits to former employees for up to 18 months. These benefits must also continue to cover the former employee’s family.

Workers’ compensation. Every state has its own set of requirements for workers’ compensation. Every state requires that employers meeting certain conditions (usually having “x” number of employees) must have workers’ comp insurance.

If an employee is injured or becomes ill as a result of their work or work environment , she can file a workers’ compensation claim and receive partial wages and receive aid in paying for medical expenses.

Short-term disability insurance . If you live in New York , New Jersey, Rhode Island, California, Hawaii , or Puerto Rico , then short-term disability insurance is mandated (though terms and conditions differ state-by-state).

This is similar to workers’ comp, but it does not require that the illness or injury be sustained in the workplace or as a result of work.

Short-term disability insurance covers a portion of the employee’s salary (typically between 40-60%) while they are on leave coping with an injury or illness. Note that this benefit does not directly cover medical expenses; it only serves to continue some portion of your income during your leave.

Health insurance. Under the Affordable Care Act (ACA), employers with 50+ employees must provide healthcare plans to its full-time employees (in this case, employees who work 30+ hours a week) or else pay a fine.

All right, that’s all the boring stuff out of the way. Now let’s get to the unlimited vacation policies and foosball tables. The optional benefits an employer chooses to provide its employees are a critical factor in the company culture , corporate priorities, and employee attraction , retention, and satisfaction.

Note that some of the “mandatory benefits” above could be included in this section (just far more generous versions of each). For the sake of brevity, we’re skipping those for this list.

We’ll try to start with the more common benefits and work our way back to the wonderfully strange ones:

Paid time off. The vast majority of employers will offer paid time off (PTO) . While benefits packages can differentiate between paid holidays , sick days , personal days , and vacation days, more employers are implementing policies that do away with these distinctions.

Retirement plan. Planning for retirement is crucial for most employees, and many companies offer assistance in this regard as a benefit. Often, companies will match contributions to a 401(k) or similar retirement plan up to a certain amount or percentage.

This basically acts as a pay bump for employees because it’s free money – as long as they can wait until retirement to actually touch those contributions.

Health insurance. We know we said that health insurance falls under the “mandatory benefits” section, but for employers with 50 or fewer employees, this benefit is technically optional.

However, any employer worth their salt knows that offering generous health insurance options is key to attracting and retaining the best of the best .

Dental/vision insurance. Dental insurance is another hyper-common benefit, with vision insurance being only slightly less prevalent. These plans, respectively, help cover the costs of dental procedures and checkups and a percentage of the cost of vision-correcting hardware and examinations.

Alternative healthcare options. Complementing employer health insurance plans, alternative healthcare options are a popular benefit. These include things like flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

FSAs are typically employee-funded (primarily; some employers may contribute a little), tax-free accounts that can be used for copayments, deductibles, and any other out-of-pocket costs.

Life insurance. Life insurance policies are meant to provide your beneficiaries with money in the event of your death. For employer-provided life insurance plans, the company pays for all or some of the premiums, and the policy covers the group of employees that sign up for it.

Disability insurance. While some states require short-term disability insurance for certain employers, others don’t. However, it’s very common for employers to offer both long-term and short-term disability insurance.

Bonuses. Bonuses take a number of forms (annual anniversary, referral, spot bonus, incentives, retention bonuses, signing bonus, stock options, etc.) and are a powerful tool in any benefits package toolbox.

Tuition assistance. With the rising costs of higher education, more and more companies are starting to offer tuition reimbursement or assistance to attract young talent saddled with mountains of debt.

Company car. Some businesses will lease cars for certain employees, which can translate into huge savings.

Employee discounts. A surprisingly large percentage of employers (42%, according to the SHRM study) offers employee discounts on services or products.

Paid parental leave. As we said, some states (California, New York, New Jersey, and Rhode Island) mandate paid parental leave in addition to the regular FMLA requirements.

Telecommuting. Ah, it’s 2020, and the world is all about remote work and telecommuting options . Although the global pandemic has certainly sped up this process, it had already been going on for years.

Flexible scheduling . Fostering an environment that appreciates and supports work-life balance is a big part of creating an attractive company culture. One way companies show their support for work-life balance is by offering flexible schedules .

Severance packages. While not exactly a benefit an employee ever hopes to need, a severance package is a good safety net that everyone appreciates. If a company isn’t doing so hot and needs to lay off some employees, a severance package helps ease their transition into a new job.

Severance packages are not required by any federal laws. Still, some states (Idaho, Maine , Massachusetts, and Rhode Island) do mandate certain practices depending on the notice an employee receives when being laid off. Severance packages typically offer continued pay (or a portion of it) for a predetermined length of time.

As an employee it is very important to understand your benefits package. As this article shows, there is the potential for your benefits to include a wide range of protections and perks.

Whether you are about to accept a job or are already employed, you should take a look at your benefits. If you are better informed about your benefits, then you can make better informed decisions that impact your career and your life.

Consider the following tips:

Analyze each benefit. Take a look at each benefit and understand what it offers. It is important to know what exactly makes up your benefits package. If you have any questions, your human resources department should help you out.

Know what you need and what you don’t. It is possible that their are certain benefits you must have that aren’t include, such as a retirement plan. Alternatively, there may be benefits you don’t need. For example, you might already have health insurance through your spouse.

Negotiate. Once you know what is in your benefits package, and what your priorities are, negotiate with your employer. Look for ways to expand compensation. If there are some benefits you don’t need, then see if your employer can provide you additional benefits or compensation somewhere else.

With these tips in mind, you can help yourself get the best benefit package possible. This will give you compensation and protection that will help you gain a stable life.

No two employee benefits packages are identical, so it’s essential to carefully consider what exactly your employer is offering. While some benefits are standard, and others are a bit more fringe, each benefit’s value is up to each employee.

For instance, a recent college graduate may value tuition reimbursement more than a generous healthcare plan, while a working mother may consider health insurance the most essential benefit.

No matter who you are, or what priorities you have, understand that an employee benefits package is a crucial factor in understanding your total compensation. Base salary doesn’t tell the whole story, so keep these benefits in mind if you’re considering job offers.

How useful was this post?

Click on a star to rate it!

Average rating / 5. Vote count:

No votes so far! Be the first to rate this post.

Matthew Zane is the lead editor of Zippia's How To Get A Job Guides. He is a teacher, writer, and world-traveler that wants to help people at every stage of the career life cycle. He completed his masters in American Literature from Trinity College Dublin and BA in English from the University of Connecticut.

Recent Job Searches

• Registered Nurse Jobs Resume Location
• Truck Driver Jobs Resume Location
• Call Center Representative Jobs Resume Location
• Customer Service Representative Jobs Resume
• Delivery Driver Jobs Resume Location
• Warehouse Worker Jobs Resume Location
• Account Executive Jobs Resume Location
• Sales Associate Jobs Resume Location
• Licensed Practical Nurse Jobs Resume Location
• Company Driver Jobs Resume

Related posts

How Many Work Hours Are In A Year? [2023]

Discretionary Vs Non-Discretionary Bonus

What‌ ‌Is‌ ‌A Job Offer? (With Examples)

How To Include Your Salary History

• Career Advice >

An official website of the United States government

Here's how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( Lock Locked padlock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Suspended Counterparty Program

FHFA established the Suspended Counterparty Program to help address the risk to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (“the regulated entities”) presented by individuals and entities with a history of fraud or other financial misconduct. Under this program, FHFA may issue orders suspending an individual or entity from doing business with the regulated entities.

FHFA maintains a list at this page of each person that is currently suspended under the Suspended Counterparty Program.

This page was last updated on 03/26/2024