A benefit sharing agreement allows someone else to pay the insurance on your behalf

  • Benefit coverage is an agreement that allows the provider to pay your insurance company directly.
  • These contracts are often used in industries such as health care and home improvement.
  • Transferring your benefits to someone else can reduce the payout, but it can also increase the risk of fraud.

When you get insurance, whether it’s for your health or your home, you’re probably thinking about what it will pay for, not how the money will be.

Policyholders who sign a part of the benefits agreement allow their insurance benefits to go directly to the provider. In most cases, this will eliminate the headache associated with the insurance company’s department. But it can also open you up to fraud.

What is a mutual benefit?

An assignment of benefits (AOB) agreement is an agreement that a policyholder signs to allow another person to receive their insurance benefits.

“Benefits work is about deciding who gets the insurance company’s money after it’s been claimed,” explains Lauren Winans, executive director and senior HR consultant. Benefits of the Next Stagean HR consulting firm that helps companies manage employee benefits including insurance.

Without an AOB agreement in place, the borrower pays the other party out of pocket, then submits a claim to their insurance company for reimbursement.

For example, if you go to a doctor, you can sign an AOB agreement so that their billing department can deal with the insurance provider directly. As such, this may prevent you from participating in the insurance industry.

That said, there may still be situations where you need to take action, even if it’s part of a benefit agreement – for example, if you owe a difference between what the doctor pays you and what the insurance company pays.

How does dividend distribution work?

These AOB agreements can vary depending on the type of insurance, provider, and state laws.

Sometimes, AOB occurs spontaneously. When you go to an online doctor, they have a contract with the insurance company. The contract stipulates that the provider will pay and receive payment from the insurance company, Winans says.

But with off-line providers you can sign an AOB agreement as part of the registration process. This way the doctor can still receive some money directly from the insurance company, and then pay you the rest.

Similarly, with property insurance, a contractor or other service professional may ask you to sign a portion of the benefits for the repair work. When this happens, the provider can file a claim on your behalf and receive payment from the insurance company.


The exact terms of the AOB contract vary depending on who is asking you to sign it. Some contracts may be specific to one type of repair or service, while others may cover several.

Some contracts go beyond the provision of benefits and give the contract full power of attorney, said Angel Conlin, the company’s director of insurance. Kin Insurancehome insurance agent.

Insurers may also differ in how they treat these contracts. Florida’s 2019 law, for example, allows insurers to issue policies that restrict the right to use the benefit agreement, as long as the policy is offered at a lower cost. Conlin says Kin policyholders who quit their gainful employment save about 5% on their policy.

“The advantage is that they get a discount for giving up rights they may not have known they had and didn’t want to use,” he says.

Distributing benefits to homeowners

For homeowner’s insurance, an AOB contract can be used if the contractor wants to be paid directly by the insurer. Most of the time, says Conlin, that happens when there is a lot of stress.

“You find that the water is running out and your house is flooding. So you immediately call the fastest service you can find,” he says. “So you’re standing there with some papers on the board in front of you to sign for them to start absorbing the water. Usually, there’s a benefit attached to it.”

Distribution of health benefits

In health care, an AOB contract can be used to pay a doctor you don’t choose, such as an anesthesiologist, Winans says. You may have chosen a surgeon, but the anesthetist who is giving you the day of surgery may pay separately. Therefore, you may be asked to sign a support section when you log in.

“You sign that anyone who sees me today will accept payment directly from the insurance company, it doesn’t have to go through me as a patient,” Winans adds.

Advantages and disadvantages of AOB contract

An AOB agreement can make claims and payments easier in some cases, but there are some issues you should be aware of. A lot depends on the situation, so consider things like what your insurance allows and what the provider is asking for.

Here are some pros and cons to consider:

While an AOB agreement can streamline claims and payment processes, there can be complications that come with transferring benefits to another party, especially with property insurance.

“Because now they stand in the shoes of the insurance company, they can do anything without asking for the insurance company’s permission,” says Conlin.

For example, a seller can inflate the interest rate and commit fraud, he says, leading to a foreclosure and leaving the homeowner unable to repair their home. Or, the seller may sue the insurance company on your behalf to pay for your claim. “So then the insured has no idea that they suddenly have liability on their records,” adds Conlin.

In Florida, these types of lawsuits became a problem because of a state law that allowed contractors to receive fines paid by the insurance company. This encouraged some attorneys to work with contractors to obtain AOB contracts and sue insurers.

“That way, the seller can raise the money they want, and the lawyer gets the lawyer’s fee. So it was this kind of partnership between them,” says Conlin. Florida’s 2022 bill eliminated these fees, but contractors are trying to do so fight it in court.

Cancellation of AOB contract

Depending on the circumstances, including the laws of where you live, people who have these laws may be able to stop the work they have been given. For example, in Florida, landlords have at least 14 days to terminate the contract without penalty.

When the grace period is over, there is not much more to do. For example, the seller may file a lawsuit over time to terminate the contract. In that case, the profit-sharing agreement stops.

A very important point

An AOB agreement can make it easier for you to receive insurance benefits without having to deal with the marketing department of your insurance company. But not all contracts are created equal, so read carefully before signing. In some cases, such as health care, a partnership can work best for both. But in some cases, such as home improvement, it may be more beneficial for the seller than the owner.

If you don’t know what the benefits agreement means for you, consider talking to a professional. The insurance provider should explain what is allowed in your situation, and outside experts, such as a lawyer, can help you make an informed decision.