When your car is damaged, is it legal to spend the insurance money on the car loan rather than the repairs?

Question

My friend hit a deer and the only damage is some dents on the hood and the side mirror. The repairs are going to cost 1900 dollars and she has a 1000 deductible, so the insurance company is going to send 900 dollars. Is it illegal for her to put that money toward the car loan, as the car isn't really worth repairing, rather than for the repairs? Do insurance companies follow up with the body shop to make sure that the repairs took place? There is no way that she could come up to the other 1000 dollars anyway, and the car still runs fine.

They check may be made out to both her and the body shop, or for either of them. If the check is out to her OR the body shop, does that make a difference?

Answer 1

The check will either be made out to her and the body shop, OR, her and the lender. So yes, it's just fine for her to sign the check and mail it into the lender.

The insurance company may follow up to see that the repairs were done - and if they aren't, they might delete coverage from the car, so I hope she's close to paying it off, as there will be problems with the loan if she's got no coverage and unrepaired damage.

Answer 2

1

Answer 3

Short answer: Yes, you can spend it how you want.

Long Answer: Whoa, there, Hoss! You are entering some possibly shaky ground!

Is the car paid off, or do you still owe money to a lender? The lender will want the car put back to it's original condition in order to protect their investment. If something happens and they have to repossess the car, they won't be able to sell it for it's "blue book" value in order to pay off the loan. In that eventuality, you'll be stuck making payments on a car you no longer have. If the lender learns that your car was damaged, and your insurance company paid you, and you did NOT make the repairs, it's possible that the lender will bill you for the cost of the repairs that weren't done.

Regardless of whether the car is paid for, or not, what happens if you get in another accident and damage that side of the car again? The insurance company expects that you had the repairs done (from this current accident) and they cut you another check to repair the car's damage (the damage you didn't have fixed). This is insurance fraud. People go to jail every day for insurance fraud. Their insurance policies are cancelled and they can't get insurance from any other company. Do you really want to be in that position?

Finally, we come to the aesthetics of the thing. If you don't have the damage fixed, you'll see it every day and be unhappy with your car. It'll bug you to the point where you either sell the car (at a reduced value because of the damage) or you fix it yourself "out of pocket". Keep in mind, that the money you get today will not fix your car tomorrow. Prices for parts and labor increase every day. So that $1900 repair, today, will cost your $2900 tomorrow. Make sense?

My suggestion? Get the car fixed and lower the deductible to $500. It won't add that much to your premiums, and in the future, it will be easier on your wallet to pay for repairs.

Answer 4

Most insurance companies will send you a check and you can do whatever you want with it. Some, however, send the check made out to the repair shop that gave you the estimate.
No one checks to see if the repairs were made.

Answer 5

She can do whatever she want with the money, if she can get the car fixed for 1.00 then she has gained 999.
When a shop know a person ins is going to pay the cost of repair is far more, have her go to a shop with the check and let them know how much she is willing to spend she may get the repair cheaper anyway. My truck was hit with 1250. to fix it, I told the ins I am a mechanic and to send me the balance above the 500 deduct. and I would fix it myself, I fixed it for three hours of my time and 60. I have the change. The ins don't care who fixes it.

Answer 6

I had that problem and normally they want the estimate from the body shop to be sent to them and they will make a check payable to the body shop for the balance of the repairs after the 1,000 deductable is met, same thing happened to me and when I thought I will repair the car later and take care of a couple of bills, the check they sent was payable to my lien holder and me, so I was not able to cash the check at all, I had to sign over the check and send it to the lien holder ,so that they in turn sent their check to the body shop after the deductable was met, unless you don't put in a claim. even then the garage charged me one price and put in more for my insurance to pay out even though I had the estimate. they got additional funds from my insurance company and my $1,000. deductable and they think we are the crooks.....

Answer 7

I got hit once and the money I got from the insurance I used it on something else my car was not that bad I think the person who did the evaluation said it was going to be more damage than it really was and he wanted me to believe that my bumper was going to fall off but that was alot of bull my car is fine. The insurance gives you a check and you do as you please with it it is your after all.

Answer 8

If a person has a mishap which is covered by insurance , and the insurance company sends a check to cover its liability one may spend it any way he wants. There is nothing illegal involved as to how the proceeds are used.

Answer 9

I believe it's fine, as long as the damages don't cause the car to break safety laws. My insurance gave me money to help pay for damages to my car based on a blue book value but I ended up just buying another car with the money because the car was smashed to crap.

Answer 10

I think they just give you a check, but some may actually pay the repair place. I know of people who didn't fix their car with the money, ppl do it all the time.