Keep Auto Insurance Claim Money?

Whether you can keep the money from an auto insurance claim depends on several factors. If you own your car outright, you can generally choose to keep the money and not repair your vehicle. However, if you have a loan or lease on your car, you are not allowed to keep the money, as the lender or leasing company has a vested interest in ensuring the car is in good shape. In this case, the insurance payout will likely be issued as a check addressed to both you and the lienholder, and you will be required to use it for repairs. Additionally, state laws regarding claim checks may vary, so it's important to check the specific requirements in your state.

If you own your car, you can keep the money

Another important consideration is the extent of the damage. If your vehicle is deemed a total loss, you will likely need to surrender it to the auto insurance company as a condition of receiving your payout. In most states, you will not receive the payout unless you give up your car. However, a few states allow you to retain a salvaged vehicle if you obtain a salvage or rebuilt title and pay the salvage value to the carrier.

If you decide to keep the money from an insurance claim and not repair your car, be aware that this could affect future insurance claims or payouts. Any pre-existing damage will not be covered by insurance in the event of a future claim, and your insurer may refuse to pay for repairs to the damaged areas if you get into another accident. Additionally, your insurance premiums may increase, or your insurer may choose not to renew your policy.

Before making a decision, it is essential to carefully review your insurance policy, understand the laws and requirements in your state, and consider the safety and long-term value of your vehicle.

If you have a loan or lease, the money goes to the repair shop

If you have a loan or lease on your car, you are not the outright owner of the vehicle. This means that you are not in control of how your claim payout can be spent. In this case, the money from your insurance claim will go directly to the repair shop.

When you have a loan or lease, the insurance check might be made out to both you and the lender or leasing company. In this case, you will need to endorse the check and send it to the lien or lease company. They will then request documentation (such as photographs and a copy of the repair bill) that the repairs were made before signing the check over to you. If you cash the check by forging the lien holder's signature, you could be held liable for fraud.

If the check is made out only to you, your finance agreement usually requires you to notify your lienholder about the damages and insurance payout. Most lenders will require you to use the money for the necessary repairs. However, you can discuss the issue with your particular lienholder. If the damage is not extensive and your loan is almost paid off, or if you plan on using the insurance claim money to pay off the loan, your lienholder may not require you to get the repairs made.

If your lienholder does allow you to keep the money and skip the repairs, remember that this is now pre-existing damage that your insurer will take into account if your car sustains damage in the future. Your insurer will deduct for this previous damage if the vehicle is damaged in the same area or if the car is totaled.

You may need permission from your lienholder before cashing

If you have a loan or lease on your car, you do not own it outright. This means that you are not in control of how your claim payout can be spent. If you try to keep the money from your insurance claim, your lienholder will argue that their asset is not being repaired. This is because, when you finance a car, it can be used as collateral to secure the loan.

In most states, the lender holds the car's title and is considered the vehicle's legal owner until the loan is paid in full. The lienholder for a car loan is often a financial firm, such as a bank or credit union, though private parties can also act as lienholders.

If you receive a check for your insurance claim, it may be made out to both you and the lienholder. In this case, you will need to endorse the check and send it to the lienholder, who will likely require documentation that the repairs have been made before signing the check over to you or a repair shop. If you cash the check by forging the lienholder's signature, you could be held liable for fraud.

If the check is made out only to you, your finance agreement usually requires you to notify your lienholder about the damages and insurance payout. Most lenders require you to use the money for the needed repairs. However, you can discuss the issue with your particular lienholder. If the damage is minor and your loan is almost paid off, or if you plan on using the insurance claim money to pay off the loan, your lienholder may not require you to get the repairs made.

If your lienholder does allow you to keep the money and skip the repairs, remember that this is now pre-existing damage that your insurer will take into account if your car sustains damage in the future. Your insurer will deduct for this previous damage if the vehicle is damaged in the same area or if the car is totaled.

You can keep any leftover money from your claim

If you have leftover money from your auto insurance claim, you can keep it as long as you meet certain conditions. Firstly, you must be the outright owner of the vehicle. If you are making payments on a loan or lease agreement, you are not considered the owner, and therefore cannot decide whether or not to fix the car. In this case, you are typically obligated to carry out the necessary repairs, and you may be required to use the auto insurer's preferred mechanic.

Secondly, you must ensure that keeping the leftover money does not violate the terms of your insurance policy. Check your insurance paperwork to make sure there is no clause stating that you must return any unused funds. If your policy includes an exclusion that forbids keeping leftover money, you must comply with this.

Thirdly, be aware that keeping the leftover money may affect your future insurance coverage. If you do not repair your vehicle, your insurer might refuse to cover any damage to the same areas of the car in the future. Additionally, your insurer may choose not to renew your policy.

Finally, it is important to be honest with your insurer and not misrepresent any facts, as this could be considered insurance fraud.

State laws regarding claim checks vary

Some states require the involvement of a lienholder, who has a financial interest in the vehicle. In these cases, the insurance company will issue a check in the name of both the insured individual and the lienholder. The lienholder will need to sign off on the check before it can be cashed. The lienholder will also want to ensure that the money is used to repair the vehicle. This may involve requiring the insured individual to provide proof that the vehicle has been repaired, such as pictures of the vehicle before and after repair, and a copy of the repair bill.

Frequently asked questions