The car accident was scary, and everyone is safe, but there is still severe damage to your vehicle. Right now money is a little tight, and you’re struggling to pay important bills. Now that you have the insurance claim check, you are wondering if you can use it for other things besides auto body repair. You have more pressing concerns that the money could go toward, but you also want to avoid being accused of fraud. Can you legally use the check? You have to carefully consider your next move.
Is It Fraud Not to Use Claim Money for Auto Body Repairs?
After the accident, you filed a claim with your auto insurance company, and after estimating the repair costs, your provider sent you a check. You’re probably wondering, “Do I have to use the claim check to repair the car? Is it fraud if I use the money for other expenses?”
The answer is that it depends. The insurance company met its legal responsibilities by sending you the claim check for damages to your car. However, how you spend this check requires you to take a number of factors into consideration. These factors will help you to know if you are legally able to use the insurance check however you want.
Circumstances in Which You CAN Use Insurance Claim Money How You Like
How you spend your check depends on a few important factors, according to NerdWallet.com. You need to ask the following questions:
1. Do you own the car?
If you own the title to the car outright, or if the car loan has been entirely paid off, you can use the insurance money as you see fit. In this situation, as the sole owner of the car, you can use the claim check to make all of the repairs, some of the repairs, or use the check for a family vacation.
2. Is your name on the claim check?
If your name is the only name on the check, and you own your car, then there is no problem. Use the check as you want. However, in some cases the insurance company pays the repair bills directly even if you own your car.
3. What is your location?
State regulations also determine how you can spend a claim check. There are states that allow insurance companies to pay a claimant directly, while other states require that the claim check be payable to the claimant and to the lien holder.
4. Can you make the repairs yourself?
If you are good at do-it-yourself projects and are mechanically inclined, you may decide to repair your own car and use the claim money on other expenses. Of course, you need experience in handling the major systems of the car, so it operates normally and safely.
5. Does the car have a lien or a lease?
If you have a financed vehicle or a leased car, how you use the claim check is more complicated. In both cases, you have to fix the car. The loan company has a financial stake in what happens to the car since they partially own it, and the leasing company expects you to return the car in good condition.
Your lender or leasing dealership probably requires you to list it on your insurance policy. This usually results in the insurance company making the claim check payable to both you and your lender or leasing company.
But you may still have other options. If you have almost paid off the loan on your car, the loan company may not require you to repair the damage if you want to use the claim check to pay off the loan. Bear in mind that your insurance company will take this pre-existing car damage into account when you file a claim in the future.
What to Do When Your Car Insurance Check Is Made Out to Your Lien Holder
Most car owners bought their car with a loan. When an accident occurs, sometimes the insurance company makes the check payable to only the lien holder. In this case, there are a few things you can do.
- Take the check to the body shop that is repairing your car.
- Cash the check at the body shop. Some shops can cash checks made out to third parties but are legally required to send any unused portion to the lien holder.
- Send the check back to your insurance company if the body repair shop won’t take the check. Include a copy of the repair estimate.
- Instruct the insurance company to make the new check payable to the body shop. Any unused money will be sent to the lien holder of your car.
- Don’t repair your car. This is another possibility. Instead, send the check to the lien holder to pay off the balance on your car loan.
As a car owner, you want to avoid accidents, but when one happens, you should use the claim money wisely. Depend on your circumstances, and the laws of your state, you may be able to use the claim for things other than repairing your car.