CarInsurance.com Insights
- Keeping insurance claim money is not fraud if you own the car outright 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, you must spend the insurance payout on repairing the vehicle.
- Filing a single claim can raise rates by an average of 20%-25% nationwide.
You’ve just received a check from your insurance company after filing a claim for car damage. But what if you decide not to use the money to repair the car? Maybe the damage is purely cosmetic, or you plan to sell the vehicle as-is. You might wonder: Is keeping the insurance money without making repairs legal, or could it be considered fraud?
The answer depends on your policy terms, whether you own the car outright, and how the claim was handled.
Do I have to fix my car with an insurance payout?
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. The 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 if you file another claim for the same damage in the future.
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 lienholder.
To cash a claim check made out to both of you, you would endorse the check and send it on to the lienholder, 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 lienholder without their endorsement, or by forging their signature.
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Can I keep a claim check if I have a loan on my car?
No. If the check is made out only to you, your finance agreement usually requires you to notify your lienholder about the damages and insurance payout. Most lenders require you to use the money for the needed repairs. However, you can discuss the issue with your particular lienholder.
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 — your lienholder may not require you to get the repairs made.
If your lienholder 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.
Who gets the insurance check when a car is totaled?
As a car owner, you might expect that the insurance check would come to you if the car is totaled. However, if you have a car loan or lease, the check will go to the lender or leaseholder. You will only receive money if some cash remains after the vehicle loan is paid off.
Of course, if you own the car outright and don’t have a car loan, the check will come directly to you.
Can I keep extra money from a car insurance claim check?
After repairing your car, you may have money left over from the claim check. While you could pocket this money, it’s probably not wise to do so without contacting your insurer first.
If the insurance company finds out that it overpaid and you pocketed some of the money, there is a chance it might penalize you with higher premiums. Alternatively, the insurance company might not renew your policy. It’s even possible you could be accused of insurance fraud.
A far better bet is to contact your insurance company to let them know that there is money left over from the insurance check and see how they want to proceed.
Is it illegal to use insurance money for something else?
It is not illegal to use your insurance money for something other than repairing your car. However, your insurer might not renew your coverage when the policy period ends.
Even if your insurer sticks with you, it’s possible that your decision not to repair the car could come back to haunt you.
“If your insurance company pays you a settlement and you decide not to repair the damage, that’s OK,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “But keep in mind if you file a future claim, any pre-existing damage will not be covered.”
In addition, there are situations where it will be difficult for you to use the money for anything other than repairing your vehicle. Sometimes, the insurer will send the check directly to the lender that issues your car loan. In other situations, the insurer might send the check directly to a mechanic or body shop.
In particular, your lender wants to the car to be fixed so it is in good shape. For this reason, the lender will likely require you to use the money for repairs.
In many cases, the insurer will make the claim check out to both you and the lienholder. Your lender might not sign over the check to you or the repair shop until it has proof the repairs have been completed.
State laws can come into play
Yes. While insurers may allow you to keep claim money, state laws can limit your options:
- Safety inspection laws: Some states require vehicles to pass regular inspections. Damage to bumpers, lights, or other safety equipment must be repaired before you can legally drive.
- Fraud statutes: Even if insurers don’t consider it fraud, some states treat certain actions — like reselling a damaged car without disclosure — as misrepresentation.
- Title branding: In cases of severe damage, your car’s title may be branded as salvage or rebuilt, reducing its resale value.
Collision vs. comprehensive claims
The type of claim matters as well when it comes to keeping a claim payout.
- Comprehensive claims (hail, falling tree branches, vandalism): Keeping the payout is less risky if the damage is cosmetic.
- Collision claims (crashes, accidents): Skipping repairs can leave your car unsafe to drive. Insurers and lenders are much more likely to require proof of repairs in these cases.
Gap insurance and total loss claims
If your car is declared a total loss after an accident, keep in mind that the insurance payout goes to your lender first.
- If the payout is less than what you owe, gap insurance covers the difference.
- However, if you kept money from a previous claim and didn’t repair the car, that damage will be deducted from your total loss settlement — potentially leaving you with a larger gap to pay.
What happens if you don’t use insurance money for repairs?
If you do not spend the money on car repairs, you will be left with a damaged and unrepaired car. If the damages are merely cosmetic, this won’t significantly impact how your car functions.
However, if the damages are mechanical or structural in nature, driving the car could become dangerous. Or, it could eventually result in the need to make bigger and more expensive repairs down the line.
Can I repair my car on my own after an accident?
If you own your car and don’t have any loans, you can repair the damage to your car on your own. However, this presents several risks.
For starters, you might miss hidden damage that a professional mechanic or car body shop would detect and fix. You might not have the tools or expertise to do the job as well as a professional would.
Most importantly, if you conduct repairs on your own, your insurer might drop your policy or place restrictions on the types of coverage you can purchase for the vehicle.
If you have a car loan or car lease, it is unlikely that your lienholder or leaseholder will permit you to perform fixes on your own.
How not using claim money affects your insurance rates
Even if it’s not fraud, skipping repairs can affect your insurance down the road.
- Higher premiums: Filing a claim usually raises your rates, whether you fix the car or not. If the damage isn’t repaired and you file again, the insurer may treat it as a second incident, which can push rates even higher.
- Pre-existing damage deductions: If the car is totaled later, your insurer will subtract the cost of unrepaired damage from your settlement.
- Policy non-renewal: Some insurers may decide not to renew your coverage if they see a pattern of claims without repairs.
What if you sell or trade your car without repairs?
If you sell your car without repairing insured damage, you could run into all sorts of problems.
- Buyers may discount the price heavily for visible or reported damage.
- Dealers may run a vehicle history report that shows the claim, reducing trade-in value.
- In some states, you may be required to disclose unrepaired damage to the buyer. Failure to do so could expose you to liability.
Frequently Asked Questions: Claims and car insurance
Can I use insurance money to pay off my loan instead of fixing my car?
Sometimes. You’ll need lender approval, and they may require proof the damage is only cosmetic.
Does keeping claim money affect gap insurance?
Yes. If unrepaired damage reduces your total loss payout, your gap coverage may have to cover more — or you may have to pay out of pocket if the gap exceeds your coverage.
Can I keep the money if my car is leased?
No. Lease companies almost always require repairs and keep control of claim funds.
Can I be sued for selling a damaged car I didn’t repair?
Yes, in some states. If you don’t disclose known damage, the buyer could sue for misrepresentation.
People Also Ask
My car was financed and it was damaged in a wreck. I have the check but the car was repossessed before repairs. Am I entitled to keep the check?
You may not be entitled to the check as you lose the legal right to the car once it’s repossessed. The funds from your insurance policy for all the covered damages will go directly to the lender. You are also responsible for the deductible and any other non-covered damages to the car you must pay the lender.
I have an insurance check but I also still owe payments on it can I use it to get my car out of the impound.
Since your car is financed, you are not in charge of how you spend the claim check – you must fix your vehicle.
Resources and Methodology
Sources
- Kin Insurance. “What happens if you don’t use insurance money for repairs?” Accessed August 2025.
- Experian. “What Can I Do With My Car Insurance Claim Check?” Accessed August 2025.
- SoFi. “Who Gets the Insurance Check When a Car Is Totaled?” Accessed August 2025.
- Cellino Law. “What If Insurance Check Is More Than The Repairs?” Accessed August 2025.
- Kneller Insurance Agency. “Can I Repair My Car After Filing a Claim?” Accessed August 2025.
Methodology
CarInsurance.com editors collected rates from Quadrant Information Services for a 40-year-old male and female driver carrying a full coverage insurance policy with limits 100/300/100 and $500 comprehensive and collision deductibles. Read the detailed methodology for more information.