Do I Have to Use Auto Insurance Claim Money for Repairs?
Whether or not policyholders have to use the money received from an auto insurance claim to fix their car depends on the situation. Insureds who are financing a vehicle will more than likely be required by the lienholder to use the money for repairs. Motorists who own their vehicles may have the option of keeping the cash and driving the damaged automobile.
Consumers who are financing or leasing a vehicle will often receive the claim funds in the form of a check that also includes the name of the lienholder. Generally, lienholders require that they are listed as a loss payee on a borrower's policy declarations page. By doing so they are an included beneficiary and maintain the rights of a payee following a loss; this is done because the vehicle is considered collateral for the loan or lease, and it protects the bank's investment.
Motorists who outright own their vehicles can usually choose to keep the money received from claims provided by auto insurance companies and drive the automobiles or have the repairs done at a later date. This would only be possible if the vehicle isn't substantially damaged and is in a safe and drivable condition.
Vehicle owners should not take the risk of driving their cars if safety features are not functional or the structural integrity has been compromised. If the air bags have been deployed or seat belts are broken, a portion of the claim money should be use to repair these. Also, missing bumpers and bumper reinforcements should also be replaced if missing or severely damaged. These parts help absorb impact and protect drivers and passengers; a future accident could be more dangerous if these parts are not repaired.
The Downside of Keeping Money from Claims
Aside from having to drive around in a damaged vehicle, there is another potential downside that may come with keeping the claim money to have the repairs done at a later date.
Typically, when a claim is filed an adjuster will be sent out to assess the damage. After the assessment is complete the insurer will issue payment to the vehicle owner. Most claims that go through the repair process, though, will need what is called a supplement, which is an additional amount provided by the insurer to pay for a claim on top of the initial assessment. If automobile owners cash their check before getting the supplement, they may have not received full compensation for the loss.
Supplements are needed if a repair facility finds damages that were not included in the original estimate and more funds are needed to fix the additional damage. If a vehicle owner chose not to have the automobile fixed, the initial payout would not have included the cost of damages that are not visible until parts have been removed while undergoing repairs; therefore, the claimant would not have been fully compensated, and if they choose to have the repairs done down the road, it may end up costing more than what the insurer paid.