Imagine that you were in an accident and while your car is
damaged, lets say a big dent in the rear quarter panel, it is still drivable.
The car is getting a bit older and there is a good chance you will replace it
in the next few years. So what should you do when that insurance claim check
arrives in the mail?
You are comfortable driving around with the damaged car so is it possible
to spend that claim check instead of getting your car repaired?
There are many factors that come into play as to whether you
can cash the check or hand it over to the repair shop. Who owns the car, what
insurer you use and what state you live in will all have an affect on your
options. Just cashing the check without checking your options can land you in
trouble later on.
Who Owns the Car?
Unless you own your vehicle outright there is very little
choice. If a leasing company or bank still holds title to the car the insurance
company will either pay the repair shop directly or write the check to both you
and the lien holder.
If the check is made out to both you and the lienholder you
will need to get a co-signature on the check from your bank or leasing company.
In the case of a leasing company you will often have to mail the check to an
out of state office.
Once you have the co-signature you will need to pay the
repair shop. According to experts, if the check is made out to both of you,
keeping the money is not a possibility. The lender or leasing company will want
the vehicle fixed because they own it and they will want to protect their
investment. All of this adds up to getting the car fixed, even if the check is
made out to only you.
Cashing the check and spending the money amounts to fraud
and it can end badly for you. Your loan or lease documents require you to
maintain your vehicle in good working order which means getting it fixed
properly if you are in an accident. Until you make the last payment and the
title is yours, the financing company calls the shots in regards to the
vehicle. When you try to turn in your leased vehicle it will have to be
repaired before they will accept it back so eventually you are going to cover
the cost of repairs either way.
The Car is Already
If you already own the vehicle and are carrying collision
insurance you may be able to get paid out and keep the cash. On the other hand
your insurer might just pay the body shop instead of you. There may be a clause
in your insurance policy that requires the check to go to the repair shop in
order to ensure the vehicle will be repaired.
The state you live in can also be a factor. Some states have
regulations that dictate who gets the check in the event of a claim payout. As
an example, in Massachusetts the check is made out to the claimant who than has
the right to decide to get the car fixed or keep the money for themselves.
Not Fixing the Car
If you decide to keep the money and not repair the car there
can be consequences. If you have an accident in the future, your insurance
company will deduct for pre-existing damage from any settlement that is offered
A damaged vehicle will not hold its resale value
as well and could prove dangerous. Properly repairing a vehicle is key to its
safety. While it may only look like a dent, there could be damage to underlying
safety features, at the least it is a good idea to have the car checked out to make
sure it is roadworthy.