Can You Keep the Money from a Car Insurance Claim and Not Repair Your Car?

In many cases, you may keep the money from a car insurance claim in New York State and choose not to repair it. However, there are exceptions to the rule and even more reasons why the short-term cash infusion may not be worth it. Complicating factors include whether or not you own the vehicle outright, if the insurance company deals directly with auto repair shops, where you live, and the extent of the damage.

Do you need the money more than the repair?

There are several reasons why a person might keep the claim money rather than spend it on the repair. You may not want to go through the hassle of car repairs, especially if it means being without a vehicle for an extended period. Or if you have an older car, you might not mind driving around with a few dents and scratches– especially if you have a hefty check in your hand– that could be used on other necessities. The auto insurer has fulfilled their obligation by making payment on a valid claim, so as long as your policy and state allow it, you can keep the money to use as you choose.

Who owns the car?

If you are making payments on a loan or a lease agreement, you technically do not own your vehicle. Therefore, you are not able to decide whether or not to fix it. Most of the time, you are not only obligated to repair your vehicle but to use the auto insurer’s preferred mechanic as well. Your lender will want you to promptly take care of the repairs to their asset. If you own the vehicle outright, you have greater flexibility in repair decisions.

Who is the payment made to?

When you have a loan or lease, the check might be made out to both you and the lender or leasing company. In this case, you’ll endorse the check and send it to the lien or lease company; they’ll ask for documentation (such as photographs and a copy of the repair bill) that the repairs were made before signing the check over to you. If you cash the check by forging the lien holder’s signature, then you could be held liable for fraud.

If the check was made out to you and you still have a loan or lease, your finance agreement may require you to at least notify the loan or leaseholder about the damage. Sometimes insurers require that you go through one of their preferred repair shops and the money is made out directly to the vendor– in which case, you have no opportunity to keep the money. However, one benefit of working with a referral repair shop is that they stand behind their work and take care of you– even if it turns out there is additional work necessary.

What if you filed a personal injury lawsuit?

Personal injury lawsuits work a bit differently. If your injuries are substantial and the other driver is clearly at-fault for the accident, you may step outside New York’s “no-fault” system to sue the driver for damages. When you receive the check, the other party does not know whether your car is financed or not. As a result, the check will be made out solely to you– but you may still need to notify your financier if it’s written in your agreement. Some policies mandate that you keep the vehicle in “perfect working condition,” which means you must repair.

Where do you live?

States like Massachusetts require insurers to make checks payable to both the claimant and the lienholder. States like Ohio mandate that specific repair shops complete the work at no additional cost to the policyholder. In New York, checks may be made out directly to claimants. 

How extensive is the damage?

Spending this claim money as you please is a gamble. Once you’ve claimed certain damages, you cannot claim it again– even if the damage worsens or you get into a future accident and it’s discovered you never repaired the first claim. You could be on the hook for paying all damages.

If you want to continue with comprehensive or collision coverage, you may need to complete the repairs as recommended. Many insurance providers drop physical coverage from vehicles that have not been repaired, with photos and receipts submitted, as per policy requirements. It is important to check with your insurer to determine what is expected of you. If you need the cash, you may be able to make your claim and have the repairs done at a later date, simply letting your insurance agent know when the repairs are done so that you can restore your physical coverage.

Substantial damage proves other challenges. You may face the choice to declare the vehicle a “total loss” or choose to repair it. A loan or leaseholder will be paid first and you second either way. If the airbags have gone off or the frame has been damaged, it is usually best to replace, rather than repair, as many insurers refuse to offer coverage on these vehicles. If you agree to repair the vehicle, but ultimately keep the check, you will be on the hook for covering future damage. Driving a damaged car diminishes its value, so you’ll receive less money for a totaled vehicle in a future insurance payout.    

Do you need to report the claim at all?

If the damage is minimal, you may avoid reporting the claim to prevent your premium from increasing. When you can afford the repair or fix it yourself, you do not need to file a claim. If another driver was involved and they are reporting the damage, you should file the claim and have your vehicle professionally repaired as well. Maintaining your vehicle in optimal working order is the best way to protect the value of your investment. Contact the New York City car accident lawyers from our firm for a free consultation if you have any further questions. We are happy to take a closer look at your policy.