Your car was damaged or totaled in a crash. Once your auto insurance claim is finalized, you may be entitled to a payout. But how does this work? Do you receive a check? Does the payment go to your lender instead? Can you spend any extra cash that doesn’t go toward repairing or replacing your car?
The answers to those questions probably aren’t as obvious as the damage to your vehicle. Several factors can complicate the process. Here’s what’s involved in cashing out a car insurance claim check after a crash.
Related: How to make a car insurance claim
How Do You Get Paid for an Auto Insurance Claim?
How you get paid for an insurance claim can depend on if you make a claim with your own insurance company or another driver’s, and if you own your car or not.
When you make a claim with your insurance company
A payment from an auto insurance claim that you file with your insurer typically goes to the person or entity that owns the vehicle, says Mark Friedlander, a spokesperson for the industry-backed Insurance Information Institute.
If you finance your car, it’s common for the lender to require that you list them on your car insurance policy, which means they will also be named on claims checks.
Here are three scenarios:
- If your car is paid off, the insurer normally sends the insurance claim check directly to you as the owner.
- If you still owe money on a car loan, the lender most likely will receive the insurance check, but in some cases the check may be written out to both you and the lender.
- If the car is leased, the claim payout goes to you and the leasing company.
In cases where the check is made out to you and a leasing or finance company, Friedlander says the leasing company or lender would need to endorse the check before you cash it.
Usually, the lender or leasing company will require you to fix the vehicle, and may even ask you to sign the check over to them, and allow them to pay the auto body shop directly. Or they may have you show proof through photos or other documentation that the car is fixed, and then sign the check and send it to you to pay the bill.
When you make a claim with someone else’s insurance company
The insurance claim payout situation differs if the payment comes from another driver’s insurance company. This may happen, for example, if another driver hits you and you file a claim against their liability car insurance.
If you make a claim against someone else’s car insurance, typically the claim check will be written only in your name, Friedlander says. But if you’ve got a loan or lease, you may be required to spend the insurance money on repairs. State regulations can play a part in how the payout is handled, according to Friedlander.
You will not be required to pay a deductible if you make a claim through the other driver’s insurance company. But here’s something to consider: The other insurance company may not agree that their driver is entirely 100% at fault. That means the insurance company may only pay a portion of your claim.
Related: Comparative negligence laws
Summary: Who Gets an Auto Insurance Claims Check?
| Own, loan or lease, and claim | Car needs repair | Car is totaled | Allowed to spend money on whatever you want? |
|---|---|---|---|
|
You own the car and make the claim with your insurance company
|
Check made out to you
|
Check made out to you
|
Yes
|
|
You lease or finance and make the claim with your insurance company
|
Check made out to you and lender/lessor, sometimes directly to repair shop
|
Check made out to you and lender/lessor; the lienholder will get their cut and you get remainder, if any
|
No, must be spent on repairs; if totaled, you can spend money that’s left after your loan is paid off
|
|
You own the car but make the claim with someone else’s insurance company
|
Check made out to you
|
Check made out to you
|
Yes
|
|
You lease or finance but make the claim with someone else’s insurance company
|
Check made out to you, may also include lender/lessor if named on your policy
|
Check made out to you, may also include lender/lessor if named on your policy
|
Typically, no
|
What Happens When a Repair Shop is Involved?
Depending on the insurance company, your claim check might be sent directly to the repair shop, especially if the shop is a preferred shop of your auto insurance company, Friedlander says. The insurance check also might be made out jointly to you and the repair shop.
Although the insurer may recommend a repair shop, you can choose any repair shop you’d like.
The sum of money you wind up with if your car is being repaired will be based on the estimated cost to fix the damage and coverage limits outlined in your policy, minus any deductible that applies.
Can You Cash Out an Auto Insurance Claim Check and Spend It?
If you own your car outright, meaning you owe no money to a lender or leasing company, you can spend an insurance claim payment however you want, according to Friedlander. This is also usually the case if the payment is from another driver’s insurance company.
But if you have a loan or lease on the car, the lender or leasing company may restrict how the payment can be spent and might even demand proof that the money went toward repairs, Friedlander says.
If insurance money is left over after repairs are made, you normally don’t need to return the surplus unless your auto insurance policy states otherwise, Friedlander explains.
“The repair shop is generally expected to complete repairs per the insurer’s estimate. If there are leftover funds, the difference is usually insignificant,” he notes.
What Happens With a Claim Check for a Totaled Car?
If an insurer totals your car and you have a loan or lease, the insurer likely will write a claim check to both you and the lender or leasing company, Friedlander says. In most cases, the lender or leasing company will take their cut first, with any surplus money going to you.
Be aware that you might owe the lender or leasing company more money than the amount of the claim payout. In this situation, you must come up with the difference between the claim payout and the loan or lease balance, according to Friedlander. If you have gap insurance, it will cover the balance you have on a loan or lease when your car is totaled and you owe more than it’s worth.
If a claim payout for a totaled car comes from another driver’s insurance company, you’ll need to settle details about distribution of the money with your lender or leasing company, he adds.
An insurer looks at factors such as the type of damage, the severity of the damage and the age of the car before deciding whether the vehicle should be fixed or be declared a total loss. If you made a claim under your collision or comprehensive coverage, the most your insurance company would pay out for your totaled car is the value of the car right before the accident, minus your deductible amount.
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