When you file a car insurance claim, your insurer reimburses you for the projected cost of repairs. But can you choose to keep the money meant for the repairs?
Yes, it’s possible. But there are a few factors that determine whether you can put the payout to other use. These factors are tied to how the check is issued.
Keep reading to find out everything you need to know about repairing a car following insurance claim and how to handle the process.
What Happens to My Car Following an Insurance Claim?
You were involved in an accident and are in the process of filing a claim. During this process, you want to know what happens to your car.
In the auto claims sector, the diagnosis of your auto usually takes two directions: repairable or total loss.
What Is a Repairable Claim?
This is pretty straightforward- the damage on your vehicle is covered under your insurance policy, it is repairable, and is worth repairing.
The car has been declared a repairable claim. How long do I have to repair my car after an accident?
A repairable claim usually brings you to the typical claims procedure of getting the estimated cost of damages.
Most of the time, your insurance adjuster signs off the estimated cost, selects the repair shop to fix your car, and stipulates the minimum time period within which the car should be fixed.
What Is a Total Loss Claim?
Total loss is a little bit complicated. It could mean that your car is damaged beyond recognition.
It can also mean that your auto is not worth repairing or is beyond repair. Your car will be declared a total loss if:
- The insurance company determines that your safety could be compromised even after the auto repairs.
- The repair costs will be more expensive or equal to the auto’s value
- Your state laws demand the insurance company to declare the car a total loss depending on the level of damage.
What Will Happen to Your Car When It’s Totaled?
You have absolute control over what happens to your car. You may allow the insurance company to take the damaged car and give you the car’s pre-accident value minus deductibles. The insurance company will then sell this damaged car or its part in a car auction.
Alternatively, you may decide to keep the auto if you have a sentimental attachment to it or think you can safely repair it.
But remember doing this might have your car given a salvage title, which may add extra hoops to jump through.
For example, even after repairing the car yourself and undergoing the DMV inspection, your insurance company might refuse to insure a salvage title.
How Long Do I Have to Repair My Car After an Accident?
When your car damaged following an accident, many questions run through your mind. Must I use the money received from an insurance claim to repair my vehicle? How long do I have to fix my car after an accident?
The truth is that every insurance agency has its own rules and policies. That means the timeline for reporting and using the insurance claim to repair your car will depend on your insurance company.
Generally, it’s recommendable to get in touch with your insurance company immediately after an accident.
The early the process begins, the better. This is not just because it will get your car fixed sooner but also because you’ll not have forgotten any details about the accident.
Afterwards, your insurance adjuster will guide you and inform you of any time limits for repairing your car.
My Car Was Not Fixed Properly After an Insurance Claim
Legally, your insurance provider is responsible for restoring your car to the condition it was prior to the accident. Should your insurer fail to meet this requirement, you are justified to take action.
Sometimes the body shop assigned to repair your car fails to get it right. In other cases, the insurance company uses shortcuts to cut on costs.
Car not appropriately fixed after the insurance claim? Here are the steps you can take to ascertain that your car is restored to pre-loss condition.
1. Inspect Your Car After Repairs
As a car owner, you are entitled to inspect repairs before paying for the job or authorizing the insurance company to pay.
If your auto has suffered severe damages, with repairs involving component replacements, it’s best to take the car for a test drive.
Make sure the wheel alignment is okay, the headlights are working, and the car does not have any unusual sounds.
2. Get Post-Repair Inspection
A post-repair inspection is a standard procedure that any reputable body shop conducts before returning the car to the owner. Unfortunately, not all body shops operate this way.
A post-repair inspection confirms that the actual damage to the car was fully addressed, establishes the quality of the repair, and assures that nothing was missed.
It’s a good idea to get a comprehensive inspection from a skilled third party to dismiss any doubts concerning the repairs.
In fact, some states offer no-cost inspections for collision repairs.
3. Contact the Insurance Adjuster
If the collision repairs aren’t satisfactory and the repair shop is unwilling to offer a post-repair inspection, it’s time to involve your insurer.
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The first person to reach out to is your insurance adjuster. Whether you choose their authorized repair shop or one of your choice, your insurance adjuster should be willing to work with you. So, contact them to advise you on the way forward.
4. Make a Formal Complaint
A reputable body shop should always make sure that the repair job is done right. If yours is an exception, filing a formal complaint would be the best cause of action. You can opt to:
- File a formal complaint with your state Bureau of Automotive Repairs. OR
- Make a complaint against the insurance company with your state’s insurance department.
If you’ve tried all the options above and neither of them works, you may want to reach out to an attorney. An experienced attorney will assist you in asserting your rights and recouping the cost of repairs from your insurance company.
What Can I Use My Insurance Money For? Does It Have to be for Repairs?
Using the whole insurance claim for the necessary car repairs is the obvious choice for your payout, but it’s not always the only option.
Don’t know what to do with your insurance payout? Consider these two factors:
Who Owns the Car?
Technically speaking, you don’t own the car if you pay any loan or lease agreement. And if you don’t own it, the decision to fix or not fix the auto or keep the money from your insurance claim is not yours to make.
Chances are that your loan or lease company is also insured on your policy. What this means is that your incoming claim check will be paid to both you and the lease/loan company. They’ll have to sign off the repairs before you can cash the check.
Either way, the involvement of your lender will vary from one insurance company to the other.
But even with your lender notwithstanding, your insurance company could demand that you use the check on repairs and send them the documentation to prove that you followed through.
Who Is the Payment Made To?
Some insurance companies don’t issue the check to you directly. They send it straight to a body shop to ascertain that you only use the money for the intended purpose.
In fact, during the claims process, your insurance provider might allow you to choose one of their repair shops only. In such a case, you have no opportunity to keep the money.
When to Put Insurance Money in to Alternative Use
If you own the car and the repairs needed are purely cosmetic, you can put your payout to alternative uses.
Likewise, if your car is old and requires frequent and expensive repairs, maintaining it would not be worth it.
Some strategic ways of using your insurance claim payout include:
Paying Off a Medical Bill
A car accident is often accompanied by minor or major physical injuries. The resulting medical bill could take a huge toll on your finances.
If this is the case, using the car insurance settlement to clear the medical dept can prevent your accumulated bills from being sent to collections.
Save the Money in an Emergency Fund
When it comes to cars, unexpected costs will always arise. That’s why you need an emergency fund to cover such miscellaneous costs.
You could start with $1,000 in an account you can easily access and grow it to three or six months of expenses.
If you don’t have an emergency fund yet, consider keeping your car insurance payout in a savings account for emergencies.
Put Extra Payment Towards Your Car Loan or Mortgage
The faster you repay your mortgage or car loan, the less interest you pay. So, making additional payments when you have some cash lying around is always a great idea.
But remember to check for early repayment penalties before going for this.
What Happens If You Don’t Use the Insurance Money for Repairs?
Just because it’s possible to put the insurance money into alternative use other than repairs doesn’t mean you should. Do you know what happens if you don’t use the insurance money for repairs?
First of all, you can’t file a claim for the same damages again. And if you do, you could end up in prison for insurance fraud.
You only have one chance at using the money received to fix your car. If the accident rendered the vehicle inoperable, imagine the consequences of not using the insurance claim to have it fixed! You could lose a car and be unable to go to work.
Secondly, if you get into an accident again in the future and the insurance company realizes that you didn’t repair the first claim, they won’t compensate you. You’ll be left to cover all damages from your pocket.
Besides, the resale value of your car will reduce if you don’t fix it. As the car owner, this might eventually hurt you as the amount you could get from selling your automobile in future will reduce.
Lastly, Unrepaired damages can be a safety hazard. Your car could be fit for the road, but the auto accident might have affected something that will eventually cause a serious breakdown.
So, get all your facts right from your authorized mechanic before making your decision.
The Bottom Line
If you’ve just received a payout from your car insurance company for your auto repairs, you might be tempted to keep the money.
But beware that this is not entirely your decision to make. Only consider this if you have the legal rights to forego repairs and can bear the impact of the minor damages to your auto without causing worse problems in future.
And if you decide to use it in other ways, it should be for essential uses like offsetting a medical bill or repaying your loan.