In a car accident, your vehicle was damaged or totaled. You may be eligible for a settlement once your auto insurance claim is resolved. But how does this function in practice? Do you get paid by check? Does the payment instead go to your lender? Is there any money left over after you’ve repaired or replaced your car?
The answers to those queries are almost certainly not as clear as the damage to your car. Several things can make the task more difficult. Here’s how to cash an auto insurance claim check following a collision.
How Does an Auto Insurance Claim Get Paid?
If you make a claim with your insurance carrier or another driver’s, and whether you own your automobile or not, how you are reimbursed for an insurance claim can vary.
When submitting a claim to your insurance company?
According to Mark Friedlander, a spokeswoman for the industry-backed Insurance Information Institute, a payment from an auto insurance claim filed with your insurer normally goes to the person or company that owns the vehicle.
If you finance your automobile, your lender may ask you to list them on your auto insurance policy, which means they may be named on claim checks.
Here are the possibilities
If your car is paid off, the insurance claim check is usually sent directly to you as the owner.
The lender will most likely receive the insurance payment if you still owe money on a car loan, although the check may be written out to both you and the lender in some instances.
If the vehicle is rented, the payout is split between you and the leasing company.
Friedlander adds that if the check is written out to you and a leasing or finance firm, the leasing company or lender must endorse the check before it may be cashed.
Typically, the lender or leasing company will force you to repair the vehicle and may even ask you to give over the check to them so that they may pay the auto body shop directly. Alternatively, they may need you to provide proof of repair via photos or other paperwork, and then sign and send you a check to cover the amount.
When you file a claim with the insurance company of someone else
If the money comes from the insurance company of another driver, the situation is different. This could happen if you are hit by another driver and submit a claim against their liability insurance.
Friedlander adds that if you file a claim against someone else’s car insurance, the claim check will usually be written just in your name. If you have a loan or a lease, though, you may be required to use the insurance money to pay for repairs. According to Friedlander, state restrictions may influence how the payoff is handled.
If you file a claim with the other driver’s insurance company, you will not be required to pay a deductible. However, here’s something to think about: The other insurance company may disagree that their driver is totally at fault. That implies your claim may only be paid in part by the insurance company.
When a Repair Shop gets Involved, What Happens?
Your claim money may be delivered directly to the repair shop, depending on the insurance company, Friedlander adds, especially if the shop is a preferred shop of your auto insurance company. The insurance check could potentially be made out to you and the repair shop jointly.
Although the insurer may suggest a repair shop, you have the freedom to choose any repair shop you like.
If your car is being repaired, the amount you get will be dependent on the estimated cost to repair the damage and the coverage limits indicated in your policy, minus any applicable deductible.
Is it possible to cash out and spend an auto insurance claim check?
According to Friedlander, if you own your car outright and owe no money to a lender or leasing business, you can spend an insurance claim reimbursement however you wish. This is also frequently the case if the money comes from the insurance company of another driver.
If you have a loan or lease on the car, however, the lender or leasing company may impose restrictions on how the payment is spent and may even demand confirmation that the money was used for repairs, according to Friedlander.
Friedlander adds that if insurance money is leftover after repairs, you usually don’t have to return it unless your auto insurance contract states otherwise.
“In general, the repair shop is expected to execute repairs according to the insurer’s estimate. If there is money left over, the difference is usually negligible, “he says.
What Happens When You Get a Totaled Car Claim Check?
If your automobile is totaled and you have a loan or lease, Friedlander says the insurer would likely write a claim check to both you and the lender or leasing firm. In most circumstances, the lender or leasing firm will take the initial cut, with any remaining funds going to you.
Keep in mind that you may owe your lender or leasing business more money than the claim payout. According to Friedlander, in this circumstance, you must come up with the difference between the claim payout and the loan or lease debt. When your automobile is totaled and you owe more than it’s worth, gap insurance will pay the remaining sum on your loan or lease.
If you receive a reimbursement from another driver’s insurance company for a totaled automobile, you’ll need to work out the details of how the money will be distributed with your lender or leasing company, he says.
Before deciding whether the vehicle should be repaired or declared a total loss, an insurer considers variables such as the type of damage, the severity of the damage, and the age of the vehicle. If you filed a claim under your collision or comprehensive coverage, your insurance company would only pay out the value of your totaled car before the accident, minus your deductible.