Auto Insurance Check Deposit: Is It Allowed?

Whether you can deposit an auto insurance check into your account depends on a few factors, including the type of insurance claim and who is listed on the check. If you are the sole owner of your car and the only name on the check, you can typically deposit the check and use the funds as needed for repairs, medical expenses, or other relevant costs. However, if there is a lienholder or lender involved, the check may be made out to both you and the lienholder, and you may need their signature to deposit or cash the check. In some cases, the check may also be made out to a repair shop, especially if the insurance company wants to ensure that the funds are used for the intended repairs. It's important to review the specific procedures and regulations that apply to your situation, as they can vary by state and insurance company.

What to do if the auto insurance check is made out to two people?

If you receive an auto insurance check made out to two people, it is likely a "two-party insurance check". This type of check is common when there is an unpaid loan against the car, and both the insured and the lienholder have a financial stake in the vehicle. The insurance company has a legal obligation to include both parties as payees.

The check can be written in one of two ways: with "or" or "and" between the two names. If "or" is used, either party can deposit the check into their bank account. If "and" is used, both parties need to endorse the check before it can be deposited. Depending on the amount, the bank may require both parties to be present with government-issued IDs to prove their identities.

If you want to cash a two-party insurance check, you have several options:

• If the check is made out to you and the auto body shop, you can take the check directly to the shop. Some shops may not accept third-party checks, but many will as they are required to send any unused funds back to the insurance company.
• If the check is made out to you and the lienholder, you can send the check to the lienholder along with a copy of the repair estimate and ask them to make a check for the cost of repairs. Any leftover amount will likely be applied to your loan balance.
• You can also send the check back to the insurance company and request that they reissue the check to the auto repair shop. The shop will then send any balance to the lienholder, which will be applied to your loan.
• If your car is a total loss, you can use the check to pay off your loan. Send the check to the lienholder and ask that the entire proceeds go towards your loan.

Can I cash the check if it's made out to me and the lienholder?

If you have an unpaid loan against your car, it is common for an auto insurance company to write a check for a claim to two separate entities. This type of check is referred to as a "two-party" insurance check, and it will almost certainly be made out to you and the lienholder. The loan you took out forms a lien against the car, allowing the lender to repossess and sell the vehicle if you don't make payments. The insurance company has a legal obligation to include both parties as payees because you both have a financial stake in the vehicle. The check will be made out to you and the bank that financed the car.

Two-party checks can be written in one of two ways. Both names will appear on the "pay to the order" line, but there will be a pivotal word between those two names – "and" or "or". If the word "and" appears, both you and a representative of the lienholder must endorse the check and present valid government IDs to prove your identities. If the word "or" appears, only one of you needs to endorse the check, and you can deposit it into either payee's account.

If you don't want to get repairs, you can send the check to your lienholder and ask that it be applied to your loan balance. If the amount of the check is more than you owe, the lienholder will apply the amount, release the lien, and cut you a check for any remaining money.

If the check is for a repair rather than a loan payoff, you will need to get the lienholder to sign the check, which could take several weeks if handled by mail. Here are the steps you need to follow:

• Send the lienholder the check.
• Have the vehicle repaired.
• Take your vehicle to a dealership when repairs are complete and ask a representative to inspect the repair and sign off on it.
• Send the lienholder the statement from the dealer, repair bill, and photos.
• Wait for the lienholder to review your documents, sign off on the check, and mail it back to you.
• Cash the check and pay the repair shop.

What if the auto insurance check is for a total loss?

If the auto insurance check is for a total loss, the insurance company will pay you the vehicle's pre-accident actual cash value (ACV). This is the fair market value of the vehicle at the time of the accident, minus any deductible and fees. The ACV factors in depreciation, wear and tear, mileage, and previous accidents, so the payout will likely be less than the original cost of the car.

If you still owe money on the car, the insurance company will pay the lender first, and you will receive whatever is left. If the settlement amount is less than what you owe, you will be responsible for paying off the remaining loan balance.

If you disagree with the insurer's valuation of your vehicle, you can dispute it by hiring your own appraiser, negotiating with the insurer, contacting your local department of insurance, or talking to a lawyer.

You may be able to keep your totaled car, depending on the laws in your state. If you choose to keep it, the insurance total loss payout will be reduced by the car's salvage value, and you will likely receive a salvage title, which can make it challenging to get insurance for the vehicle or sell it.

If you decide to deposit the auto insurance check into your account, make sure to check with your bank about their specific requirements and procedures for cashing an insurance check.

What happens if I don't want to repair my car?

If you don't want to repair your car, you have a few options, but it's important to note that this decision may come with some financial consequences and restrictions, especially if you have a loan or lease on the vehicle. Here are some scenarios and considerations to keep in mind:

Keeping the Insurance Money Without Repairing the Car

If you own your vehicle outright and decide not to repair it, you may be able to keep the insurance money. However, this depends on the type of damage and the insurance company's policies. In some cases, insurance companies may require proof of repair, especially if there is a lienholder involved. It's essential to review the terms of your insurance policy and understand the restrictions on how the claim money can be used.

Not Repairing Due to High Costs

If the repair costs are more than the value of your car, it's usually a sign that repairing it is not worth it. In this case, you may choose to sell your car or buy a new one instead of investing in costly repairs. This decision should consider your budget and the current car market.

Dealing with a Lienholder

If your vehicle is financed or leased, your lienholder has a financial interest in it. This means that any insurance claim check will likely be made out to both you and the lienholder. If you don't want to repair the car, you can send the entire check to the lienholder, who will use the proceeds to reduce the balance on your auto loan. This option is particularly prudent if you are comfortable driving a damaged vehicle.

Negotiating with the Mechanic/Garage

If you've already taken your car to a mechanic or garage and are now having second thoughts about the repair, it's important to understand your rights. You can negotiate with the garage and try to find an alternative solution. If negotiations fail, you may need to take further action, such as seeking assistance from a trade association or using an Alternative Dispute Resolution (ADR) Scheme. Remember to keep a paper trail of all communications and correspondence during this process.

Considering the Safety and Functionality of the Vehicle

Ultimately, safety should be a top priority. If your car has faulty transmissions, bad brakes, steering problems, or other serious issues, repairing it is crucial. However, if the car is simply older or has more miles on it, it may not necessarily be unsafe to drive. A good mechanic will let you know of any serious concerns and advise you on whether repairs are necessary.

What if I want to use a different repair shop?

When it comes to auto insurance and repairs, you have the right to choose the repair shop that fixes your car. Your insurance company cannot force you to select a specific repair shop, even if they recommend one from their network. However, they may put some restrictions on your choice of repair shop and require you to obtain multiple repair estimates if they think the initial estimate is too high.

• Check your insurance coverage: Understand what your insurance policy covers. Collision coverage, for example, helps pay for car repairs when you're at fault in an accident, while uninsured motorist coverage can help if your car is damaged by a driver with little to no insurance.
• File a claim with your insurance company: Submit a claim by contacting your insurer or using their website/app. Provide details, photos, and videos of the accident and damage. Keep in mind that filing a claim may not make sense if the repair cost is below your deductible.
• Work with the insurer's claims adjuster: The insurance company will assign an adjuster to review your case and estimate the claim payout. Be present during their inspection, obtain their contact information, and stay in touch if you have any concerns.
• Choose a repair shop: While you can pick any repair shop, your insurer might offer a lifetime guarantee on work done by their recommended shops. Compare repair costs, read reviews, and ensure you get a written repair estimate.
• Understand the financial implications: Using a different repair shop may affect your insurance premium, especially if the accident was your fault. The premium increase can vary depending on the insurer and the severity of the accident.
• Consider the repair costs: If the repair cost is significantly higher than your deductible, filing a claim is generally a good idea. If it's only slightly higher, you may want to consider covering the cost yourself to avoid a potential increase in your premium.
• Be aware of the lienholder's role: If you have a loan on your vehicle, the lienholder (lender) may have a say in the repair process. The insurance check might be made out to both you and the lienholder, and they may require proof of repairs before releasing the funds.

Frequently asked questions