Even if you’d like to be free to spend your insurance check, many auto insurance companies have decided that you can’t. After you file a claim, you’re usually obligated to apply the funds to repairs, medical bills, debts, or other expenses directly related to the insured event. Auto insurance companies enforce this obligation by having another party, like a mechanic or mortgagee, sign the check. Bankrate explains a few ways to get around this situation, depending on whose name is on the dotted line of your insurance check:
When will I receive my auto insurance claim check?
If you file an auto insurance claim for a matter that was covered under your insurance policy and settled by a claims adjuster, you may receive a check that covers the costs associated with your claim (minus any applicable deductibles). Talking to a qualified insurance agent can help clarify whether your accident is covered and whether you are eligible to receive benefits.
Cashing an insurance claim check can be a gray area, as there aren’t always clear instructions on how to use the check. There are multiple ways a claim check can be handled, but it’s usually made out to the person primarily responsible for following through on the repairs. In most cases, the claim check will be made out directly to you, to two parties, or to a secured creditor, depending on the details of your situation, including who the insurance holder of your vehicle is.
A check is issued to two parties
When your auto insurance claim is paid by your insurance company, you may receive a check made out to you and an authorized repair shop. Your auto insurance company may issue a two-party check to ensure the funds are only used for the intended repairs. However, the check isn’t always made out to you and the mechanic. In situations such as a total loss, the check may be written out to you and a lender, called a lienholder, and you’re expected to apply the check to pay off your auto loan.
In either case, if it’s a two-party check, you can determine what to do by checking if the names include “and” or “or.” If it includes “or,” you can cash the check alone. If the names are joined with “and,” you may be required to sign and hand the check over to the designated repair shop to complete the repairs.
The check is made out to the secured creditor.
If a claim-related auto insurance check was issued to you and your auto loan provider, you may not be able to access the funds in the check on your own. Because the check has both your and your lender’s names on it, the check may need to be approved by you and your lender. Once the check is sent to your lender and properly signed, you can cash it and use it to pay off your auto loan or pay it off in full.
But what if the check is for repairs and not a loan repayment? This is where things can get lengthy: The check needs to be signed by the mortgagee (or leaseholder, in the case of a lease), which can take weeks if processed through the mail. This process typically follows these steps:
- Send a check to the secured creditor.
- I’ll get my car repaired.
- Once the repairs are complete, take your car back to the dealership and have a technician inspect and approve the repairs.
- Send the statement from the dealer, the repair bill, and photos to the lien holder.
- Wait for the secured creditor to review the documents, sign the check, and return the check to you in the mail.
- Once you receive the check, cash it and pay the repair shop.
Can I keep my car insurance check?
While using the entire amount of your insurance payout on car repairs is an obvious choice, it isn’t always the only option. However, whether or not you can use the money for other purposes depends on several factors, mostly related to how the check is issued.
The check is a third-party claim
Generally, you have the most flexibility if the insurance check for your car comes from the other responsible party’s insurance company. For example, if you were in a no-fault accident and the other driver’s insurance company issues you a check to settle your claim, you may be able to decide how to spend the money. However, before you can get any money from your auto insurance company, you’ll likely need to be provided with an estimate of your damages, and you’ll want to use the funds to repair your car.
If you lease or loan your car, keep in mind that the lien holder may have stipulations about how you use the check and may require proof that the damage has been repaired. Also, if your car is a total loss and you receive a check for the damages, you will be responsible for paying the amount owed to the lender.
Claim Check is more than just a repair
In some cases, the claim check may exceed the total amount of repairs required for your vehicle. How the excess amount is handled depends on how the check is written. In some cases, the insurance company may require proof of repairs, in which case a check will be written to both you and the certified auto repair shop up to the specified amount. The repair shop is usually expected to complete the repairs as per the estimate assigned to them. If there are funds remaining, the difference is usually small.
If you decide to use an independent repair shop instead, and the total cost of the repairs is less than the insurance check paid to you, you may be able to receive the difference. However, it is important to ensure that all necessary repairs have been made, as you cannot claim more than once for the same damage. If there is a difference between your insurance check and the cost of the repairs, it may be worth double-checking that the vehicle has been fully repaired in accordance with your insurance company’s claims agreement.
Does my state determine what I can do with my claim check?
Each state has its own insurance regulations, including how claims are paid. Some states, such as Massachusetts, allow insurance claims to be paid directly to the insured by check. This money can be used for repairs at an auto repair shop of their choice. Otherwise, insurance companies often use two-party checks made out to both the policyholder and the repair shop to ensure that funds are used only for expenses outlined in the claim settlement, to reduce check-cashing fraud on insurance claims. Be sure to check your state’s laws regarding insurance or talk to your agent to find out how your state handles claims. Your insurance company can explain to you state laws regarding how claims are handled.
