Can I Keep Insurance Money and Not Fix My Car? What to Know

Dealing with car damage after an accident is never fun. While your first instinct may be to pocket the insurance check and skip the repairs, doing so comes with risks. Here’s what to consider when deciding whether to keep insurance claim money instead of fixing your car.

Is It Legal to Keep the Payout?

In many cases, you can legally keep your auto insurance claim payment and not complete repairs. However, there are a few key factors to consider:

• Do you own the car? If you have an outstanding auto loan or lease, your lender likely requires you to fix the vehicle. You may have to provide repair receipts before cashing the check.

• Who is the check payable to? If made out to both you and the lienholder, they would need to endorse it before you can cash it.

• What does your policy say? Review your insurance contract for any clauses requiring you to complete repairs to maintain coverage.

• How badly is it damaged? Extensive unrepaired damage will diminish your car’s value and compromise safety.

• What state do you live in? Some states mandate repairs or restrict how claim payments can be used.

While the insurer fulfilled its duty by paying your claim, keeping the money does come with financial risks in many cases.

Reasons People Keep the Cash

There are a few reasons why someone may want to keep their car insurance money rather than repairing:

• Need cash more than repairs – Pocketing the money can help pay other expenses if you’re short on cash.

• Drive an older car – For an high-mileage vehicle, cosmetic damage may not be worth fixing.

• Hassle of repairs – Some may want to avoid the repairs process and shop visits.

• Do repairs yourself – Savvy DIY-ers may plan to complete repairs for less than the claim amount.

• Damage is minor – Small dings or cracks could be lived with instead of repaired.

While these mindsets are understandable, there can be significant downsides. Consider them before deciding.

Risks of Not Repairing After a Claim

Choosing not to fix your car after an insurance claim payment carries a few key risks:

• Increasing damage – Unrepaired issues could worsen, leading to more repair costs down the road.

• Safety hazards – Driving with damaged parts can make your car unsafe.

• Lower resale value – Unfixed damage will decrease your car’s value when you go to sell or trade in.

• Higher premiums – Your rates may increase if you drop collision/comprehensive coverage due to unfixed damage.

• No coverage for the same damage – Your insurer won’t pay again for damage they already covered if it worsens.

• Loan default – Not repairing may violate loan terms, and your lender can repossess the vehicle.

Weigh these outcomes carefully against the appeal of quick cash. The short-term gain may not justify long-term consequences.

Steps to Legally Keep Claim Money

If you decide keeping your claim check is the right move, here are steps to do it legally:

• Review your policy – Confirm no clause requires you to complete repairs.

• Ask your insurer – Directly ask if you’re required to fix the damage. Get confirmation in writing.

• Inform lienholder – If you have a car loan, tell them about the damage and that you plan to delay repairs.

• Double-check title – Ensure no lien exists that would restrict your ability to cash the insurer’s check.

• Don’t commit fraud – If required to fix your car, don’t falsely claim repairs were completed.

• Maintain coverage – Be prepared to pay higher premiums if dropping collision/comprehensive coverage due to unfixed damage.

Following these guidelines helps avoid legal issues when deciding not to repair.

Tips for Smart Claims Handling

To make the best decision about your car insurance money, keep these tips in mind:

• If repairs are affordable, complete them promptly to protect your asset.

• Compare repair quotes – don’t assume the insurer’s estimate is your best option.

• Negotiate your claim settlement if their estimate seems too low.

• For minor damage, consider paying out-of-pocket instead of filing a claim.

• If delaying repairs, move your car to protected storage to prevent further damage.

• Inform your insurer once repairs are eventually completed.

• Consult your mechanic – are unrepaired issues unsafe to drive with?

• If your car is totaled, you usually can’t keep it and the payout.

Making smart choices reduces the risks of keeping your claim money. Working with a professional public adjuster can help maximize your claim amount without the need to cut corners.

What If I Have a Car Loan?

If you still have an outstanding auto loan or lease, proceed with extra caution before keeping claim money:

• The finance company may require you to repair the vehicle promptly. Failure to do so can put you in default.

• The claim check may be payable to both you and lienholder. They would need to sign off before you can cash it.

• Your loan terms may stipulate that you maintain the car in “perfect working condition.” Make repairs to comply.

• Even if you own the car, inform the lender of damage and discuss delaying repairs if needed. Get their permission in writing.

• Beware of insurance check fraud. Never sign the lienholder’s name without authorization.

To avoid headaches, open communication with the lender is key if you want to defer repairs on a car you’re financing.

Alternatives to Pocketing the Money

If you don’t want to repair your car immediately but are concerned about the risks, consider these options instead of cashing the check:

• Deposit the funds into a savings account. Earn interest while holding the money and complete repairs later.

• See if the shop can delay repairs for a few weeks if you need time to arrange financing.

• Ask the insurer if they can reissue a check in a few months when you’re ready to fix your car. There may be a time limit.

• For newer vehicles with replacement cost coverage, inquire about using the funds as a down payment on a new car.

These give you time to determine the best approach without forfeiting your insurance settlement.

The Bottom Line

While keeping your claim money may be tempting, in many cases it creates more hassles than it’s worth. But if you understand the risks and take steps to mitigate them, pocketing the check instead of repairing can make financial sense in certain situations. Your best bet is speaking with your insurer, lienholder if applicable, and an attorney before cashing the payment to make an informed decision. With a professional public adjuster’s help, you can often increase the claim payout amount significantly, making repairs more feasible.