If your car accident claim is approved, you’ll most likely use the insurance money for repairs. But what happens if you don’t? Many claimants worry about being denied or receiving a check for less than the actual cost of repairs to their vehicle. However, it’s not unheard of for someone to consider using the money for something else.
If you’re curious about what happens if you don’t use the insurance money for repairs, we’re here to help. The short answer is — it depends on whether you own or lease the vehicle, what your insurance policy says, and the legal requirements in your state. Here’s a more in-depth look.
Understanding How Insurance Claim Payments Work
Car insurance laws are mostly set at the state level. As a result, insurance rates and how payouts are managed differ greatly from one state to another. In some states, insurance companies are required to write a check to the person covered by the policy (unless the insured requests otherwise). Other states require a lease or loan company to be named on a policy and insurance claim check.
In California, the payment process varies depending on the type of damage and the vehicle’s ownership. If you own the car, your insurance company will often pay you or your authorized repair shop directly. If you lease or finance the car, the insurer is required to include the lessor or lending company on the claim check.
Depending on your insurance company, they may send the claim check to the auto shop. This ensures the money goes toward repairs. When filing a claim, you may be required to use an insurer’s preferred mechanic, although some insurers will let you pick one.
Do You Have to Use the Money for Repairs in California?
If you own your car outright, you don’t have to repair your car after an insurance claim. You can spend it elsewhere as long as your vehicle meets California’s safety and inspection laws.
If you lease the vehicle, you will likely receive a check that’s made out to you and the lienholder, as they’re the legal owner. They’ll often require you to put the funds towards repairs or paying off your balance because they have a financial interest.
When You Can Legally Keep the Insurance Payout
When you receive an auto insurance settlement, you’re not always required to spend it on repairs. In the instances below, you can legally keep the insurance money instead of repairing your car.
If you own the car outright
When you don’t have a loan or lease on the car, and the check is in your name, there are no rules on what to do with the money. Pocketing the cash won’t be considered fraud. Your insurer fulfilled its responsibility, and presumably, you’ve met your policy’s requirements.
If your car has cosmetic damage, you could decide not to fix it and spend the money on something else. But you can’t claim the same damage again, or you can be charged with fraud. It’s important to consider the type of repair you need. Neglecting to make some repairs can put your safety at risk.
The insurance check is more than the repairs
Policyholders often receive checks for less than the cost of repairs. But what if the repair bill is less than what you receive? Insurance payouts are typically based on inspections conducted by claims adjusters and estimates provided by auto body shops. If you get more than the insurer pays out, you don’t have to return the leftover money. Chances are, it won’t be that much anyway.
What Happens If You Don’t Repair Your Vehicle
Before deciding to skip out on repairs, check that you’re not contractually obligated to fix the vehicle. Many loans or lease agreements require you to maintain the car in good condition. If you don’t repair your car after an accident, it can violate your agreement or be considered fraud.
If your car is declared a total loss or “write-off,” you can negotiate with the insurer to keep your vehicle and receive a reduced payout for its salvage value. You will still be responsible for ensuring the vehicle is safe to drive and meets California’s safety and registration requirements.
Handling Partial or Low Insurance Payouts
Sometimes you can receive a payout that’s not enough to cover repairs. If you receive a partial or low car insurance payment, you can dispute it by sending a formal demand letter to your insurance company. Your letter should include all documentation related to your accident, such as police reports, photographs, and repair estimates, along with an explanation of why the payout is insufficient.
If negotiations fail, you can submit a complaint with the California Department of Insurance (CDI) or pursue legal action. Some drivers choose to take their dispute to small claims court to recover the difference.
Special Rules for Financed or Leased Vehicles
If you lease a car or have a loan, a lien will be placed on the vehicle. Most lien holders require notification of any damages or insurance payouts. You can discuss the issue with them, but they will most likely demand that you fix the car. The vehicle is their asset, so if you pocket any claim money, they can argue that their asset is not being repaired or properly cared for.
The lender or leasing company may also be named on your insurance policy. That means the check will be made out to both you and them. Your lender or lessor will most likely require you to use the check for repairs. They’ll also need documentation proving you met your obligation, such as repair receipts or before-and-after photos of your vehicle.
Contact The Law Offices of Jacob Emrani
If your insurance company denies a claim or sends a check for less than the cost of repairs, our Los Angeles personal injury lawyers can help. We’ll fight for your rights and ensure you recover the money you need to fix the damage and pay for your medical bills after an accident.
To set up a free case evaluation at our law firm or in your home or office, call (888) 732-8948 today.