Whether or not you can keep the cash from a car insurance payout rather than use it for its intended purpose, which is to fix your car, depends on whether or not you fully own your vehicle. If you don’t own it outright, the money that is rewarded to you after an accident should go directly towards repairing your car. If you do own your car outright, then it’s up to you how you utilize the compensation that your insurance provider issues to you.

Insurance Claim PayoutHowever, not using the payout for the needed repairs can affect your continued coverage. It’s always a good choice to get the damages repaired in order to keep you car’s value intact.  Let’s examine why.

If your car has been totaled or suffered major damage from an accident, flood, fire, theft, tornado, or hurricane, you will most likely need your auto insurance payout to repair the damages. If your car is a leased vehicle or if you still have an outstanding loan on the car, you should get the car repaired. Your lender will require repair because they want the collateral (the car) fixed of any damage. As partial owner, you are responsible to get the vehicle repaired within a specific amount of time. Most lenders ask to be listed on your insurance policy as a “loss payee” to make sure you have full coverage at all times. It is important to note that if your vehicle has been classified as a total loss, you won’t be able to receive a payout and keep the damaged car. Usually, your auto insurance company will require possessing the vehicle that was totaled as a condition to your payout terms. So even if you think the car can still be driven, you will not receive a payout unless you turn the car in.

When you own the car outright, you have more flexibility when it comes to repairs. Your auto insurance company will most likely provide you with the option to repair or not repair the car in order to total out or buy the car back. If you don’t need your car immediately, it may seem easy to default to spending the money on something else. Ultimately, you will have to get your car fixed so ideally you should, in fact, use the payout to get the needed repairs. It would make sense to get the car fixed while you have the money available to you. By not using the money to get the damages repaired immediately, you are risking the possibility of causing even more damage to the car. Waiting for a later date to get the car fixed can also cause your auto insurance company to drop physical damage coverage because you chose not get it repaired.