You just received a check from you auto insurance company to repair minor damages to your car from a recent accident. You're OK driving a banged up car and would rather spend the money elsewhere.
What are your options?
Several factors come into play, such as who owns the car, your insurer and the state where you you live. Cashing the check without regard to these can land you in trouble later on.
Leasing or still paying on your car limits options
Unless you own your vehicle outright there is 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.
Owning you car gives greater flexibility
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 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 then has the right to decide to get the car fixed or keep the money for themselves.
Not repairing your car has repercussions
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 to you.
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.
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