Insurance Payout: Do I Have to Fix My Car?

If you’ve had a major collision and your car is so severely damaged that you can’t drive it, you have no choice but to use your insurance payout to have your vehicle repaired. But what if you only have minor damage like a small scratch and dent? Perhaps you want to use the cash from the insurance company to pay for something else more urgent, or maybe you don’t want to be without your car for the time it takes to repair.

Either way, it’s important to know whether you have to use the insurance payout to fix your car, or whether you can do whatever you want with the cash.

Insurance questions can seldom be answered with a simple “yes” or “no,” and whether or not you have to fix your car with the cash from your insurance payout is no different. It depends on two things.

Is There an Outstanding Loan on the Car?

If you have a loan on your car, you will need to get the car repaired, usually by a reputable auto body shop approved by your insurer. This is because the car is the lender’s collateral until the loan has been paid, and the lender wants the vehicle to be in tip-top condition.  In this case, paying for repairs with your insurance payout is a must.

Lenders are usually listed on auto policies as loss payees to ensure that you have full insurance coverage for the period of the loan.

As long as there is an outstanding loan on the car, it’s your responsibility to use insurance payout to repair your vehicle.

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Do You Own Your Car Free and Clear?

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.

There’s Another Option: Don’t Report the Claim

If you have a single car accident, which means that you were at fault, and the damage to your car is only cosmetic, you may decide not to put in an insurance claim. You can either pay for the repair yourself with your own cash or not fix your car at all. The advantage of this approach is that your insurance premiums won’t be increased.

But if the damage to your car is a result of a collision with another vehicle, and you are required to file the claim, then you may as well claim for your car too.

In Conclusion

Even when you have the option of using your insurance payout for something other than fixing your car, it’s a good idea to have your vehicle repaired. It’ll be far less expensive should you have a second major collision, and your car will have a higher resale value.

Whether you’re paying for collision repairs yourself, or whether your insurance company is, call Orlando Auto Body at 480-418-4737 for a quote and professional advice.