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UPDATED: Mar 13, 2020
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Auto accidents can be a major inconvenience. Even if the damage is minor, you still lose valuable time by handling the claim, getting the vehicle inspected and completing the repairs. For some drivers, repairing the vehicle may not seem worthwhile. The damage may be cosmetic, or the car might be old and no longer valuable to you. Although you might not want to fix the car, you are still entitled to receiving a settlement, and you may wish to use that settlement for something other than repairing the vehicle.
Depending on the situation, you may or may not be able to use the money for your insurance claim to pay for other expenses. By understanding how insurance works and whether you’ll be able to make the best choices for yourself, your vehicle and your finances.
How Much Money Will I Get for a Claim?
The amount that you receive in compensation for an insurance claim is equal to the repair cost of your vehicle less any applicable deductible. This means that even if you don’t plan to repair your vehicle, the amount of your settlement will still equal the prospective repair cost of the car. This also means that you need to have your vehicle inspected and complete an estimate before you can get money from the insurance company, even if you do not intend to pursue repairs.
Almost all insurance companies will require an estimate from their own damage adjusters. This means that you cannot get the estimate done at the shop of your choice; instead, you must bring your vehicle to an inspection location or have the adjuster come to your home to look at the vehicle. The inspection should take 30 minutes to an hour and in most cases you will leave the estimate with a check.
Bear in mind that the amount of this initial check is based on the visual appearance of the vehicle and often does not take into account hidden damages. If you plan to have the car repaired, you can submit a supplement request to make up the difference. Otherwise, you can only get the amount listed on the estimate that the adjuster supplied.
When Do I Need to Repair My Vehicle?
If you are not the vehicle’s sole owner, the adjuster will most likely issue the check two-party. The second party on the check is usually a body shop, but it may be a lien holder or anyone else who has ownership of the vehicle. It’s the insurance company’s job to protect the interests of the vehicle’s true owner by ensuring that the car is repaired. This means that cars you lease, finance or own in tandem with a company must be repaired.
Repairing a vehicle is especially important if you lease it because the car must be in excellent shape when you turn it in. If it fails to pass the lease inspection, you will owe money out of pocket to cover the cost of repairs. Similarly, if a vehicle that you finance gets repossessed, you are liable for any damages that were on the vehicle at the time of the repossession.
When Can I Use the Money for Something Else?
Because your insurance company is primarily protecting the interests of the vehicle’s owner, your insurer will most likely always write a two-party check to ensure that the vehicle gets repaired unless you can present a clear title. If you’re not at fault for an accident, however, the other person’s insurance company may pay for your damages by issuing a check to you directly.
Some states have lien holder requirements for all drivers, but the majority of places do not require insurance companies to protect a lien holder’s interests if they do not insure that vehicle. This means that most settlement checks you receive from another insurance company will be made out directly to you whether or not you are the sole owner of the vehicle. You are free to use that money however you see fit.
Bear in mind that choosing not to repair a vehicle that you don’t own outright is a risk. If you are not open to being liable to the financing company for damages, you should get your car repaired rather than accept the settlement and spend it on other things. There are a few times when choosing not to repair your vehicle is less risky:
— If you own the car outright and you need the money for other things
— If the vehicle is so old that repairing it would be a waste
— If the car still runs and you don’t care about cosmetic damages
— If you can repair the vehicle yourself for less money
In other words, if it’s more financially sensible to use the money for other things than spend it on car repairs, it may be worthwhile to request that the check be made out to you. As long as you own your vehicle, you can use the insurance settlement for anything that you see fit but you have to be careful. If the same damage happens again you will most likely have a claim denied if the proper repair work wasn’t done.