Insurance companies are much more flexible if you own your car outright, and they won’t insist that you have your car repaired with the insurance payout, but the risk of not fixing the damage is enormous.
If you choose not to repair the car, the insurance company will no longer insure you for collision damage. This is perfectly reasonable: you may have a second collision that makes the damage worse, and they’ve already paid you once.
When you’re short of cash, it can be very tempting to use the insurance claim money on something more urgent, but can you really do without collision damage cover? You may be involved in a major collision, and the repair will cost a lot of money, or your car may even be totaled. This unfortunate situation could leave you financially worse off, or even without a car at all.