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Do I Have to Fix My Car With Insurance Money?

July 24, 2019

After a damaging auto accident, it could take weeks to receive a payout from an insurance company. Receiving payment from the insurer could mean finally repairing your accident-related vehicle damage, unless your policy permits you to use the money in other ways. In Colorado, if you own the vehicle, you could potentially use the insurance money on something other than repairs. Your options will depend on the details of your insurance policy.

Read the Fine Print

Most auto insurance companies do not stipulate that policyholders must use the benefits they receive through a claim on vehicle repairs. Claimants typically have the option of cashing out an auto insurance claim to receive the benefits as a check, rather than the money going directly to an auto shop. The insurance company has fulfilled the terms of the policy by providing benefits and thus does not care what the claimant does with the money.

However, it is wise to read the fine print of your insurance policy to make sure the company will not penalize you for failing to repair your vehicle with the money you receive. Some insurance companies require the money to go straight to a mechanic to ensure it goes toward repairs. In this case, keeping the money could constitute insurance fraud. Avoid serious criminal consequences by reading the full text of your auto insurance policy or asking an agent before using the money on something other than repairs.

Fulfill the Terms of a Loan or Lease Agreement

You might not have the power to use an insurance payout for anything other than vehicle repairs if you do not own the car outright. If you lease your car or owe money on a vehicle loan, the terms of your agreement could require you to spend insurance money on the vehicle. Your automobile insurance policy could list the loan or leasing company as one of the insured parties. If this is the case, the insurance company will make the check for repairs out to you and the loan or leasing entity.

If you receive an insurance check with more than just your name on it, you cannot cash it or use it for your benefit without the other party signing off as well. A check with your vehicle leasing company’s name on it, for example, would not be yours to spend. The leasing company must sign off on repairs before you could use the check. Each leasing and loan company will have different rules for what you must do with insurance checks. Contact your company or your car accident attorney to learn exactly how to proceed.

Think About Your Options

Just because you can use the insurance money for something other than repairs does not mean you should. Your insurance company will not permit you to file a claim twice for the same damages. If you try, you could end up in jail for insurance fraud. You only have one opportunity to use the money you receive to fix your vehicle. If the car accident rendered your vehicle inoperable, think about the repercussions of not using the money to get it fixed. You could be out of a car and unable to drive to work.

Failing to fix your car could also diminish its resale value. As the owner of the vehicle, this could ultimately hurt you by reducing the amount you could get if you were to sell the car in the future. Unrepaired damage could also be a safety hazard. Even if your vehicle still operates, the auto accident might have damaged something that could eventually cause a more serious breakdown. The damage could be worse than you initially thought. Get all the facts on the damage to your vehicle from a licensed mechanic before making your decision.