If you own your car, you can cash out your insurance claim check (minus the deductible) instead of repairing your vehicle. But your insurer will only pay to fix your vehicle for the same claim once. Here’s what you need to know.
Do I have to fix my car with the insurance money?
When you claim against your auto insurance policy, you can “cash out” and receive money as compensation (minus your deductible amount) instead of having your insurer pay a body shop to fix your vehicle.
However, if you don’t own your car outright but instead have a loan or lease, you aren’t in control of how your claim payout can be spent. If you try to keep the money from your comprehensive insurance for hail damages, your lien holder will argue that their asset is not being repaired.
The insurance company has met its obligation by paying the repair costs for the damages it found. Your car insurance company shouldn’t take the money back or consider it fraud if you don’t use the insurance money to repair the vehicle. But it is fraud is if you file another claim for the same damage in the future.
- Keeping insurance claim money is not fraud if you own the car and the insurer sends the claim check to you instead of sending it to your repair shop.
- If you have a loan or lease on your car, then you cannot choose to spend the insurance payout on something else and not repair the vehicle.
- Most lenders would want you to use the money for repairs, but you can talk to your lender about it.
Most lenders require you to place them on your auto insurance policy as a loss payee so that the insurer will issue any check for repairs (or the totaling of the car) to you and your lien holder.
To cash a claim check made out to both of you, you’d endorse the check and send it on to the lien holder, which may require you to send the documentation that the repairs were made to the vehicle (such as a copy of the repair bill and photographs of the repaired car) before they will sign over the check to you or a repair shop.
It could be considered fraud if you cashed a check made out to you and the lien holder without their endorsement (or by forging their signature).
Can I keep a claim check if I have a loan on my car?
If the check were made out only to you, your finance agreement would usually require you to notify your lien holder about the damages and insurance payout. Most lenders would mandate you to use the money for the needed repairs; however, you can discuss the issue with your particular lien holder.
If the hail damage isn’t that extensive and your loan is almost paid off, or if you plan on using the hail damage insurance claim money to pay off the loan, then your lien holder may not require you to get the repairs made. Don’t be surprised if they demand that you fix the car.
If your lien holder does allow you to keep the money and skip the repairs, remember that this is now pre-existing damage the 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 out.
— Penny Gusner contributed to this story.
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The CarInsurance.com editorial team bases its reporting on data it commissioned Quadrant Information Services to gather on average auto insurance rates for more than 34K ZIP codes across the United States. Typically, averages are based on rates for a single, 40-year-old male, with no violations who commutes 12 miles to work each day and has a full-coverage policy with limits of 100/300/100 and a $500 deductible for collision and comprehensive coverage.
