Surplus Auto Insurance Claim Checks: To Keep Or Not To Keep?

Whether or not you can keep surplus money from an auto insurance claim check depends on several factors, including whether you own your car outright or are still paying off a loan or lease, and whether the insurance company deals directly with auto repair shops. If you own your car, you can spend the money as you wish, but if you are still paying off a loan or lease, the lienholder may impose restrictions on how the payment is used and may demand proof of repairs.

If you own your car, you can spend the money on anything

If you are looking to buy a car, it is generally recommended to buy a used car rather than a new one. Used cars are typically cheaper and will depreciate at a slower rate than new cars. When buying a used car, it is important to do your research and make sure you are getting a good deal. You can use online resources, such as Kelley Blue Book or Edmunds, to find out the fair market value of the car you are interested in.

It is also important to consider the cost of ownership when buying a car. This includes the cost of gas, insurance, maintenance, and repairs. These costs can add up quickly, so it is important to budget for them when deciding how much to spend on a car.

If you are looking to sell your car, you may be able to keep the insurance payout rather than use it for repairs. However, it is important to check with your insurance company and lienholder to make sure you are allowed to do this. If you have a loan or lease on your car, you will likely be required to use the insurance payout to repair your car.

If you have a loan or lease, your lienholder may restrict how the payment is spent

If you have a loan or lease on your car, the insurance company will likely issue a cheque addressed to both you and the lienholder for car repairs. Lienholders have a vested interest in your car being in good shape, so they will most likely require you to use the insurance payout to repair your car.

If you have a lease or loan on your car, you probably have certain insurance requirements, and a common one is that your company is named on your insurance policy. As a result, you may find that the claim cheque issued to you by your insurance company has both your name and the name of your loan company on it.

If that's the case, you will need the finance company to sign off on the insurance cheque before you can cash it. The amount of oversight your loan company will want through the claims process can vary considerably, and it's essentially up to the loan company how much control it takes.

Sometimes a representative will just verify that the accident occurred, sign the cheque and send you on your way. It's also possible that your loan officer will require you to sign the car insurance cheque over to the company, and it will pay the repair company on your behalf.

If your car is leased, the claim payout goes to you and the leasing company. In cases where the cheque is made out to you and a leasing or finance company, the leasing company or lender would need to endorse the cheque before you cash it.

Usually, the lender or leasing company will require you to fix the vehicle, and may even ask you to sign the cheque over to them, and allow them to pay the auto body shop directly. Or they may have you show proof through photos or other documentation that the car is fixed, and then sign the cheque and send it to you to pay the bill.

With a leased vehicle, there are likely to be stringent repair requirements, such as only using factory parts rather than aftermarket parts.

You may need permission from your lienholder before cashing the check

If you have a loan or lease on your car, the insurance company will likely issue a check addressed to both you and the lienholder for car repairs. A lienholder is the party that holds a lien on your car until your loan is paid in full. This is usually a financial firm, such as a bank or credit union, but it can also be a private party.

Lienholders have a vested interest in your car being in good shape, so they will most likely require you to use the insurance payout to repair your car. If your car is leased, there are likely to be stringent repair requirements, such as only using factory parts rather than aftermarket ones.

If that's the case, you will need the finance company to sign off on the insurance check before you can cash it. The amount of oversight your loan company will want through the claims process can vary considerably, and it's essentially up to the loan company how much control it takes. Sometimes a representative will just verify that the accident occurred, sign the check, and send you on your way.

It's also possible that your loan officer will require you to sign the car insurance check over to the company, and it will pay the repair company on your behalf.

If you don't repair your car, you'll be responsible for any additional costs if the problem gets worse

If you don't repair your car, you may be faced with additional costs if the problem gets worse. This is one of the biggest drawbacks of using your car insurance claim check for another purpose.

Let's say you've been in an accident and your car has sustained damage. Your insurance company will issue a check to cover the cost of repairs. However, if you choose not to use this money for its intended purpose and instead decide to keep it, you are essentially accepting the risk that the problem could worsen over time.

For example, let's say you've received a payout from your insurance company, but instead of repairing the damage, you choose to ignore it and use the money for a vacation. Over time, the damage to your car could worsen, leading to additional problems and higher repair costs. In this scenario, your insurance company will not cover these additional costs, leaving you responsible for the bill.

Additionally, auto insurance companies are cautious about fraud and will not provide coverage for the same claim multiple times. So, if you experience the same issue again, your insurance company will investigate thoroughly to ensure there is no fraud involved. They may even deny the claim if there is evidence that the damage was pre-existing, even if it was primarily due to a second incident.

Therefore, it is essential to carefully consider your options before deciding what to do with your car insurance claim check. While you may have the legal right to refuse repairs, you should also weigh the potential risks and costs associated with leaving the damage unattended.

You can cash the check if you've already repaired the vehicle

If you own your car outright, you can choose to cash the insurance claim check and not repair your vehicle. However, this may not be a wise decision, as you will be responsible for any additional costs if the vehicle's problem worsens. Auto insurance companies will not provide coverage for the same claim twice and are wary of fraud. If you experience the same issue again, your insurance company will investigate thoroughly to ensure you are not committing fraud and may deny the claim if there is evidence that the damage was pre-existing.

Additionally, if you don't make repairs, your vehicle may incur additional damage, which your auto insurance will not cover as it resulted from your negligence in not using the initial payout for repairs. If your vehicle is deemed a total loss, you will not receive your payout unless you give up your car. In some states, you may be able to retain a salvaged vehicle if you pay the salvage value to the carrier, but you would need to obtain a salvage or rebuilt title.

If you have a loan or lease on your car, the insurance company will likely issue a check addressed to both you and the lienholder for car repairs. Lienholders usually require you to use the insurance payout to repair your car and may demand proof of repair before signing the check over to you or the auto repair shop. With a leased vehicle, there may be stringent repair requirements, such as only using factory parts instead of aftermarket ones.

If you've already repaired your vehicle before receiving the insurance claim check, you can cash the check and use the money for other purposes, as long as you own your car outright. However, it's important to consider the potential consequences of not using the money for repairs, as mentioned above.

Before making any decisions, carefully review the terms of your lease or loan agreement, as well as your state's laws regarding insurance payouts, to ensure you comply with all relevant requirements.

Frequently asked questions