Auto repair facilities often find additional damage beyond what the adjuster sees.
You may be surprised to know that your auto insurance company may not require you to fix your car after you have an accident. In fact, insurers often spend less money settling a claim by simply cashing out the value of the damages rather than going through the repair process. Know what your options are when you receive a settlement check from your insurer.
First Party vs. Third Party
Vehicles get repaired by insurance companies in two different ways, and your ability to refuse repairs may depend on which you choose. If you have comprehensive and collision coverage on your policy, you can always have your own insurance company fix your car as a first-party claim. If another person is negligent for the accident, you may be able to make a third-party claim against his insurance company. Both should result in a satisfactory settlement, but the procedures may be different.
Lien Holder
If you have an auto loan on your vehicle at the time of the accident, your options may be limited. If you file a first-party claim, your insurer may be contractually obligated to issue a settlement check that includes your lien holder. This means you must get your lender to endorse the check before you can cash it, which lenders typically won't do. A common alternative for insurers is to replace the lien holder with a repair facility. This allows your car to get repaired, but disallows you from cashing the check.
Claimant Settlements
If you file a third-party claim with the other party's insurer, you are a claimant against her policy's liability coverage. Because your own insurance company is not part of this claim, you do not have a contract with the insurer that offers you a settlement. This may mean that you can receive a settlement check with only your name on it, even if you have a lien holder. If so, this is your money to do with as you wish.
Your Money
If you receive a third-party, or a first-party settlement without a lien holder, you can use the money to repair your car or not. If the damage is minor or cosmetic, if the vehicle is older or if you're getting ready to sell it, you may feel that the cash amount is more valuable to you than the repairs. Make sure the vehicle is still safe to drive, but otherwise you may deposit the money and treat yourself to something nice.
Tags: lien holder, settlement check, first-party claim, insurance company, insurance company
