Preserving a car's value is important.
When receiving a check from the insurance company following an accident, an individual can take his vehicle to any repair shop he wants. If the car is repaired for less money, he can pocket the remainder. The biggest concerns when repairing a damaged vehicle are preservation of the car's value and safety as well as compliance with any conditions of a loan or lease. Repairing the vehicle at a cheaper shop or fixing it yourself for less money and keeping the remaining proceeds may be harder than it sounds in certain situations.
Insurance Payout
Once the insurance company approves a person's claim, the insurer usually pays the claim either directly to the repair shop or as a check issued to the car owner. The payout process depends somewhat on the insurance company and a policyholder has the option of asking for direct payment. If somebody else is at fault in an accident, his insurer will pay for the repairs to the third party. This is the optimal situation since there is no relationship to the insurance company. The insurance company will not be able to dictate to whom the check goes and most third-party claims result in insurance companies making the check directly to the third-party claimant.
Using Proceeds
It may be tempting to use an insurance company check to cover a mortgage payment, pay down the car loan or put the proceeds toward other pressing expenses. If the money is not used to repair the car, the value of the car is reduced. If the owner has the misfortune of being involved in another accident, the damage reimbursement will be less since the value of the car is lowered by the previous unrepaired damage. Alternatively, if the policyholder uses the insurance proceeds to repair the original damage on the car, the vehicle's value is maintained when it is ultimately sold or traded in.
Lender or Lease Contract
Before making a decision to repair a vehicle on your own, check any existing lender or lease contract. There may be a provision in the contract requiring repairs to be made as long as a vehicle is still being financed or leased.
Instead of issuing a check directly to a car owner, some insurance companies may issue the check to the car owner and the lienholder. This requires the driver to mail the check to the financing company for a signature. A lienholder may also require an examination of the car to endorse the check. Usually, dealership personnel need to examine the vehicle and sign a statement certifying that the car repairs were performed adequately. Then the person must mail bills from the repair shop and pictures of the repaired car along with the check to the lienholder. Finally, the lender or bank will endorse the insurance check and return it so the car owner can pay for the car repairs.
Potential Issues
In the case of any subsequent accidents, an insurance company might choose to total the car if the cost to repair it exceeds the car's actual cash value. The insurance company would pay out the market value of the car, which might be substantially lower due to previous damage that was either unrepaired or poorly repaired, especially if the car was not brought back to its original condition.
Tags: insurance company, repair shop, check directly, insurance companies, less money
