Obligation to use car insurance proceeds?

[fast_and_curious]

My wife was rear-ended a couple of weeks ago, while stopped at a traffic light. (Apparently a dog in the car behind her jumped into the lap of the driver, causing this driver to hit the gas!) Resulted in some scratches, swapped paint, and a chunk taken out of the rear bumber of my wife's car.

We contacted the at-fault-driver's insurance company, took the car to a body shop as requested, and had the estimate sent to the insurance company.

When this has happened in the past, when dealing with a different insurance company, the insurance company directed us to take the car to the shop to get fixed, and paid the shop directly.

In this case, the insurance company just sent us a paper check. Made payable to my wife (not the body shop).

My question is - are we under any legal or moral obligation to get the car fixed? Or can we just pocket the check? There's no safety issue with my wife's car, just a cosmetic one, and we might prefer to have the money in hand rather than use it to repair the damage.

There was no written correspondence from the insurance company, just a check with no letter or explanation, so it's not like we've signed anything committing to get the car fixed. But of course, the amount was based on a quote from a body shop, so maybe there was some expectation that that's what we would do with the money.

Thanks!

[Goal33]

I don't think so...

But be sure that your wife has no injuries before cashing that check.

[sport]

I had hail damage to a car that was very hard to see. I took the car to a State Farm facility and they assessed the damage and I received a check. I just cashed it and never repaired the car. There was never a problem.

[Jack FFR1846]

You are under no obligation to fix the car. You can pocket the check. The reduced value of the car is your loss.

This can happen whether you use your own insurance company (with collision) or the other person's. Our car was driven into last summer. 100% their fault. I spent some time pushing out the door to make it look somewhat better, pocketed the check and have no intention of ever fixing it.

If you had wanted to fix the car, that's when you bring it to the body shop and have the shop work directly with the insurance company. That way, if they find more damage, you don't lose any money.

[runner3081]

Nope, not at all.

We had a car hit in the parking lot, other insurance company cut us a check and we just invested it.

It dented the rear panel and tore off the bumper cover. I screwed the cover back on and pounded out the panel.

[wolf359]

This is a common tactic of the insurance company. Usually the amount of the check is less than the actual cost to fix the problem at the shop. If you cash the check, you're done. If you let the insurance company know that you're fixing the problem, and sign the check over to the repair facility, then the insurance company will pay the remaining amount to the repair facility (if/when it comes up short.)

[dm200]

Generally, no.

One possible exception is the situation when a car is financed and the loan agreement may require proceeds be payable to lienholder AND owner. This does not sound like the situation here. Last year, for example, someone backed into the side of our 1998 Camry - took to that at fault driver's insurance adjustor - gave quote of about $500 to fix - but small dent - we kept the money and chose to live with the small dent.

[dm200]

This is a common tactic of the insurance company. Usually the amount of the check is less than the actual cost to fix the problem at the shop. If you cash the check, you're done. If you let the insurance company know that you're fixing the problem, and sign the check over to the repair facility, then the insurance company will pay the remaining amount to the repair facility (if/when it comes up short.)

Sometimes, though, it is the opposite. You find a reputable repair/body place that will fully repair the damage for less.

[j0nnyg1984]

There's no issue with you keeping the check. I had (have) some major hail damage. Progressive paid me out around $3600 to get a new hood, new windshield, new bed cover, and lots of dent removal. I said the hell with that, it's a 10 year old truck, and pocketed the cash.

I would say just to beware, at some point in the future if you get into another accident, the insurance company may not cover the existing damage. Insurance companies are decent at swapping information with each other, so even if you have changed insurance companies, you may be SOL...

[Dandy]

To me you have incurred the loss - the value of your car is now likely less. You can choose to repair or use the cash for other purposes. I have had some repairs fixed and others, when the car was old, just spent the check on other things.

[wolf359]

This is a common tactic of the insurance company. Usually the amount of the check is less than the actual cost to fix the problem at the shop. If you cash the check, you're done. If you let the insurance company know that you're fixing the problem, and sign the check over to the repair facility, then the insurance company will pay the remaining amount to the repair facility (if/when it comes up short.)

Sometimes, though, it is the opposite. You find a reputable repair/body place that will fully repair the damage for less.

Yes, or if you can fix it yourself, you also might be able to come out ahead.

I've also seen adjustors make a mistake like trying to low-ball a repair when they should have totaled the car. They ended up paying for repairs that exceeded the residual value of the car. Usually, though, they know what they're doing.

[StevieG72]

No obligation to fix the car.

You can do as you please with the money.

The insurance company doesn't care if you fix it or not.

You are not defrauding the insurance company by not fixing the car. The car is damaged and is worth less now, the insurance company paid the claim to make you whole.

[92irish]

Interesting thread - as I am in a similar situation where I recently had some bumper damage that was not my fault.

I sent the insurance company an estimate from an autobody shop and then they sent me a joint check (payable to me and to the auto body shop where I got the estimate). I called the insurance company and asked if they could just send me a new check just to me (and not a joint check). I flat out told them yesterday I was debating whether I was going to fix the damage or just live with it as it is kind of my beater car with over 120k miles. They did not care and said they will send me a new check just in my name.

[Iliketoridemybike]

The check makes you whole, but the value of the car is now decreased by at least that amount. If you get in another accident in the same area on the car, they may deduct the value of the first accident. Trade-in value of the car will be less.

[grabiner]

Is the car financed? If so, the bank might demand that you repair the car, to protect its own interest. (If your loan balance is $20K and the accident decreased your car value from $22K to $18K, the bank no longer has full collateral for the loan.)

[munemaker]

Insurance companies make check payable to body shop and policy holder if the car is financed, to protect the lender. If the car is not financed, you do not have to fix it. It is a free country! However, hidden damage is sometimes found during the repair process, and if there is any, you are not being compensated for it. Also, if you do not have the car repaired, and the damaged part is hit again, they will not pay you for the same part twice.

[2comma]

No legal or moral obligation to use the check to repair. I knew a guy that had his car hit 3 times and he pocketed the check each time. He said he couldn't afford to get rid of the car, it was a goldmine.

[nashirak]

Speaking as an insurance adjuster for a major company:

1) No, you are not required by us to fix the vehicle. If the car is financed, your bank may require it.

2) No, cashing the check does not limit repair or injury options. If you cash the check then decide two weeks later to fix the vehicle and the shop finds hidden damage, the shop can report this to the insurance for supplemental payment. Injury claim payments are handled separately and one does not affect the other.

3) as has already been said, you may take a financial hit on trade-in or selling if you don’t repair it, or you may not get paid if you get hit again in the same area. That’s just a decision you have to make.

[DaftInvestor]

I don't think so from a legal NOR a moral standpoint. Legally - if you don't repair the damage - "prior damage" could be deducted from a future claim. Morally - since whether you repair the damage or not you are STUCK with car that will be de-valued at trade it.
(essentially ANY accident shows up on CarFax and you are likely to get $1000 less for the car as a result even if you restored the car to original condition after the damage - it doesn't matter if the damage was just cosmetic - folks want cars with 100% clean records these days or they want deeper discounts for the "risk" of there potentially being a problem due to the damage).

[DaftInvestor]

3) as has already been said, you may take a financial hit on trade-in or selling if you don’t repair it, or you may not get paid if you get hit again in the same area. That’s just a decision you have to make.

Your likely to take a financial hit even if you DO repair it. As soon as someone sees "ACCIDENT" in big red letters on the CarFax they will immediately de-value the car by $1000.

[petras52]

Make sure that the initial repair estimate is accurate. My car got rear ended and the offending driver's insurance company sent me a check for $500 to replace the rear bumper cover. I didn't cash the check and took the car to another body shop that discovered about $6K in additional damage. It was surprising as the damage didn't look bad initially.

[One Ping]

Make sure that the initial repair estimate is accurate. My car got rear ended and the offending driver's insurance company sent me a check for $500 to replace the rear bumper cover. I didn't cash the check and took the car to another body shop that discovered about $6K in additional damage. It was surprising as the damage didn't look bad initially.

Not saying this is the situation in your case but ... just because a repair shop SAYS there is an additional $6K in damages DOES NOT MEAN there really IS an additional $6K in damages. Jus sayin ...

[jbmitt]

Speaking as an insurance adjuster for a major company:

1) No, you are not required by us to fix the vehicle. If the car is financed, your bank may require it.

2) No, cashing the check does not limit repair or injury options. If you cash the check then decide two weeks later to fix the vehicle and the shop finds hidden damage, the shop can report this to the insurance for supplemental payment. Injury claim payments are handled separately and one does not affect the other.

3) as has already been said, you may take a financial hit on trade-in or selling if you don’t repair it, or you may not get paid if you get hit again in the same area. That’s just a decision you have to make.

100 times this. There is always misinformation in insurance related posts on this site. I've spent 10+ years in the adjusting world and I'm glad others are also trying to correctly explain things.