Can you keep insurance money from a car accident?

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Here's what you need to know...
  • After filing a claim under your auto insurance policy for damage to your car, you may be offered a settlement check for the claim
  • While it can be very tempting to use the settlement money from an auto insurance claim for other purposes than fixing your car, this can be a problematic choice if you do not own the vehicle outright
  • If you are leasing the car, you may be required under the terms of your lease agreement to have the car repaired
  • If you are the owner of the vehicle and do not have any loans on the car, the insurance company may be more willing to write you a check directly. If you choose not to get a repair done, then the insurance company may choose to drop your coverage for physical damage to your car
  • If you choose not to repair your car, you may risk getting a lower resale value and a lower settlement from your insurance company in the event that you have to file a claim for damage to your car in the future

You must think hard before deciding to take the money from a car insurance settlement and not use it to actually repair your damaged car. It can be very tempting to simply let the damage to your car slide, especially if you drive and older car and the damage was purely cosmetic.

However, there can be repercussions for deciding not to have your car repaired from both the insurance company and if you try to sell your car down the line.

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Receiving Money from the Settlement of a Car Insurance Claim

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If you file a claim under your auto insurance policy, you will likely be given a settlement offer from the insurance company. Once your claim is filed, a representative from your insurance company will inspect your vehicle to evaluate the vehicle. Your auto insurance company will likely get an estimate for the cost of the vehicle repair and will base its settlement offer to you on this estimate.

You do not necessarily have to have the repair work done at the repair shop selected by the auto insurance company.

Remember: You have the right to obtain your own estimate regarding the cost to repair your vehicle. You can submit this to the auto insurance company for consideration in determining how much of a settlement that you qualify for.

You do have an obligation to cooperate with the insurance company’s investigation of the accident, so be sure to submit all requested forms and paperwork on time.

Based on the cost of repair, you will receive a settlement offer from the auto insurance company. Sometimes, this check is made out directly to the auto repair shop that will be performing the repair work on your vehicle.

Depending on the specific terms of your auto insurance policy, you may also have the option to have the settlement amount made payable directly to you from the auto insurance company.

If you are able to receive the settlement check directly from the auto insurance company, then you may want to explore options other than using the money to have your vehicle repair. This may be especially true if your vehicle is older or if you do not mind having cosmetic damages to your car.

The option of keeping the settlement check for other purposes is especially tempting if the damage is all cosmetic and not likely to affect your ability to drive the car.

Insurance Settlement Checks for a Leased Vehicle

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If you are leasing your car, it is very likely that your lease agreement contains a provision that requires you to repair your car in the event of an accident and upon receipt of a settlement from your auto insurance company.

In addition, many lease agreements specify exactly which auto repair parts must be used in the event that your car needs repaired. This is important information to keep in mind so that you do not end up costing yourself time, money, and headaches at the end of your car lease term.

Insurance Settlement Checks for a Vehicle that You Own Outright

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You may have more options available to you in deciding how to use a check from the settlement of an auto insurance claim if you own your vehicle outright. One option that you may have is to continue driving the car without any repairs and having your collision and comprehensive coverages dropped from your policy.

The auto insurance company may insist on this, in fact, if you do not follow through with having your car repaired. Check your policy for specific details about your obligation to have your car repaired after an accident.

The auto insurance company may insist on this, in fact, if you do not follow through with having your car repaired. Check your policy for specific details about your obligation to have your car repaired after an accident.

The reason that the insurance company may choose to drop your comprehensive and collision coverage if you do not repair your car after an accident is that they do not want to have to pay for damage in the future that could be compounded by the existing damage to your car.

If the insurance company makes the claim check out to you personally, then you may be required to show some type of proof in order to continue with collision and comprehensive coverage under your existing auto insurance policy.

If the insurance company makes the claim check out to you personally, then you may be required to show some type of proof in order to continue with collision and comprehensive coverage under your existing auto insurance policy.

To show proof of a repair, you may be asked to take a picture of the repairs done to your car. The auto body repair shop may also be requested to fill out a confirmation form for the auto insurance company. You will want to keep records of the receipt for the work performed and make sure that you submit all of the requested paperwork on time so that your auto insurance coverage is not dropped.

If you are considering selling or trading in your vehicle at any point, then you will most certainly want to have all of the required repair work performed. This is because the value of your car will be reduced drastically if you have existing damage that you fail to fix. The damage can worsen over time, which can cause the value of your car to depreciate even faster. While you may not be bothered by minor cosmetic damage, the damage could show on your car history report, so you would want to have a record of having it repaired as required.

You May Decide Not to Report a Minor or Cosmetic Claim to Your Insurance Company

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Many drivers are understandably concerned that their premium will increase if they choose to report an auto accident claim to their insurance company. In fact, an insurance company may choose not to renew your policy if they find that you have filed over a certain number of claims during a given time period.

If you are thinking about filing a claim just to get the settlement money, you may want to consider the effect that this could have on the renewal of your auto insurance policy and whether you may be paying higher rates for the renewal of your policy.

One of the ways that you can save money and have more options in requesting auto insurance quotes is to consider increasing your deductible. In general, if you pay a higher deductible, then you can lower your monthly premium. If you are comfortable fronting some of the repair costs out of pocket, then a higher deductible may be an option for lowering your auto insurance payments that you should consider.

If you are involved in an accident with only minor cosmetic damage, you may want to consider paying the repair costs out of pocket instead of filing a claim. If your deductible is very high, it may not be worth the trouble of filing a claim, especially when facing relatively minor damages to your car.

However, you may still want to have the damage to your car repaired because it will be more difficult to sell your car in the event that you need to purchase a new car or trade it in with existing damage. Damage to your vehicle can also get worse over time, so the sooner you have it repaired, the more likely you will be able to get a reasonable asking price for your car.

The Bottom Line on Using the Money from a Car Insurance Settlement

Before you spend the money from a car insurance settlement check on something other than having your vehicle repaired after an auto accident, you should think seriously about the consequences. You may even be required to have the necessary repairs performed if you are leasing your car.

In the event that you choose not to have your car repaired and spend the money from your insurance settlement on something else, then you may not be renewed for collision or comprehensive coverage from your auto insurance agency. You may also have a much more difficult time selling or trading in your car down the line.

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