Insurance Claims: Vehicle Repairs And Your Rights

Whether or not you have to spend insurance money on vehicle repair depends on several factors, including the type of insurance policy you have, the extent of the damage, and whether you own the vehicle outright or are still making payments. If you own your car outright and your insurance policy doesn't specifically require that the claims check goes directly to a repair shop, then the money is yours to spend as you wish. However, if you have a loan or lease on your car, you are typically required to use the insurance payout to fix the vehicle. Additionally, some insurance companies will only pay a preferred or Direct Referral Program auto body repair shop directly, leaving you with no opportunity to keep the money. It's important to carefully review your insurance policy and understand your state's laws regarding insurance payouts to make an informed decision.

If you own your car, you can spend the insurance money however you wish

When you receive an insurance payout, it is typically up to you whether to use it for repairs or other purposes. If your car has sustained major damage, it is generally advisable to fix it as soon as possible to avoid further complications and ensure your safety. Additionally, consider that choosing not to repair your car may affect future claims and reduce its resale value.

If you decide to keep the insurance money instead of repairing your car, be aware that this could have implications for future claims. For example, if the same area of the car is damaged again, insurers may not cover it. Moreover, filing a claim for the same damage twice could lead to accusations of fraud. Therefore, it is essential to carefully consider the potential consequences before deciding how to spend your insurance money.

In some cases, the insurance company might send the payout directly to the repair shop, especially if you have a loan or lease on your car. This is because the lien holder or leaseholder has a financial interest in ensuring the vehicle is properly maintained. As a result, they often require repairs to be made and may have control over how the insurance payout is spent.

Ultimately, if you own your car outright and your insurance policy and state laws allow it, you can choose to spend the insurance money however you wish. However, it is important to carefully consider the potential consequences of your decision and always prioritize your safety and the long-term value of your vehicle.

If you have a loan or lease, the money will likely go directly to the repair shop

If you have a loan or lease on your car, you are not in control of how your claim payout can be spent. The money will likely go directly to the repair shop. This is because the car is not yours outright, and the lienholder will argue that their asset needs to be repaired.

In most cases, your lender will be named on your insurance policy and the claim check will be made out to both you and the lender. The lender may require you to send them documentation proving that the repairs have been made before they will sign over the check to you or the repair shop.

If you try to cash the check without the lender's endorsement, or by forging their signature, this could be considered fraud.

The only time you can pocket the claims money is if your state and insurance policy allow it, and typically only if you own your car outright.

If you don't repair your car, you may face safety issues and decreased resale value

If you don't repair your car, you may face safety issues and a decreased resale value. While it's not always mandatory to use your insurance payout on vehicle repairs, it's often the wisest decision.

Firstly, let's address safety. If your vehicle is unsafe to drive due to damage, it's essential to use your insurance money for repairs. Driving an unsafe car puts yourself and others at risk. Even if the damage seems minor, there could be more serious underlying issues that a professional can detect. By delaying repairs, you may end up with bigger and more expensive problems down the line.

Now, let's discuss resale value. If you decide to sell your car without repairing it, you'll likely get a lower price. The amount of damage will reduce the vehicle's value, and potential buyers will be turned off by the needed repairs. Additionally, if you don't fix the car and try to sell it later, you may not get a higher price even if the value of similar cars has increased. This is because, in most cases, car repairs don't increase the resale value to match the current market value.

Furthermore, specific issues can decrease your car's resale value even more. For example, an unusual paint colour, mismatched tires, or a heavily customised appearance may turn off potential buyers.

Therefore, while it's your choice to spend insurance money on repairs or keep it, consider the potential consequences of skipping those repairs. It could be a safety hazard, and you may not get a good price when you eventually sell the vehicle.

You may need permission from your lienholder before cashing the check

If you have a loan or lease on your car, you don't have full ownership of the vehicle. This means that the decision about whether or not to keep the money from an insurance claim may not be yours to make. If you have a loan, your lender is the lienholder until the loan is fully paid off. A lienholder is the party that holds a lien on your car and is considered the vehicle's legal owner until your loan is paid in full.

In most cases, the lienholder will be a financial firm, such as a bank or credit union, but it can also be a private party, such as a family member or friend. The lienholder may require you to carry specific auto insurance coverages and may determine your car insurance deductible amount. They can also require you to use the insurance payout on repairs.

If the insurance check is made out to both you and the lienholder, you will need their permission before cashing the check. This may involve sending them documentation that the repairs have been made, such as a copy of the repair bill and photographs of the repaired car. If you cash a check made out to both you and the lienholder without their permission, it could be considered fraud.

If you have a loan or lease on your car, it is important to check with your lienholder about how you can spend any insurance payouts. While it may be tempting to keep the money, doing so could impact your ability to claim for the same damage in the future and may even be considered fraud.

State laws regarding insurance claim checks vary

If you own your car outright and your insurance company cuts you a check after you file a claim, you can do whatever you want with the money. However, there are some considerations to keep in mind. For example, if you don't fix your car, you'll be responsible for any additional costs if the vehicle's problem gets worse. Additionally, auto insurance companies won't provide coverage to repair things more than once and are wary of people committing fraud by submitting the same claim multiple times.

If you have a loan or lease on your car, you are not in control of how your claim payout can be spent. The lienholder will argue that their asset is not being repaired. In this case, you will need permission from your lienholder before cashing the check. The amount of oversight your loan company will want through the claims process can vary.

Frequently asked questions