You've had a car accident and you're relieved to find that the
damage to your vehicle is only cosmetic.
When the check for repairs arrives from the insurance company,
you're tempted to deposit it in your checking account and use the
money for more pressing needs, like your daughter's new braces or a
well-deserved weekend getaway.
Could you? Should you? Let's look at the possible
Cash out, baby!
As long as the check is made out to you, it is your choice
whether to "cash out," as the practice is called, or repair the
car, says Dan Young, senior vice president of insurance relations
for CARSTAR, the largest collision-repair network in North
However, sometimes insurance checks are made out directly to
body shops or, if you're financing the car, to both you and your
lender. If you are leasing, the check might be made out to you and
your leasing company.
Here's more on
who gets the claims-payment check
Even if you're able to cash out, opinions differ on whether it's
a wise move.
Dean Baker, co-director of the Center for Economic and Policy
Research in Washington, D.C., says it could be "a smart thing to
do" if the dents and dings are minor and they don't bother you.
"I had a car that got damaged in a hail storm and it was an old
car," Baker says. "I wasn't going to spend the insurance money I
got to fix it. I wasn't expecting to keep the car long and I didn't
really care what it looked like."
The car had little resale value, so a few more dings weren't
going to make much of a difference at trade time, he says.
Wait, you might regret it!
Others warn that a decision to cash out and skip the repairs can
come back to haunt you.
Safety is a big concern for unrepaired cars, Young says. The
damage from your accident may not look that bad, but there could be
trouble with the brakes or the wheels or even the engine that you
can't see. If you continue to drive the unrepaired car, it may make
the problems worse.
According to a 2011 report in Edmunds' AutoObserver.com, the
economic hard times brought on by the current recession has led
many motorists to delay auto repairs, making their cars potentially
unsafe to drive.
Young observes that cashing out is becoming less popular.
Because the economy is picking up, "I don't think it's as prevalent
now as it was in 2009, 2010."
Want a good reason to repair your car as soon as you get the
check? Some of the damage may not be visible to your claims
adjuster. When the body shop starts working on your car, it might
find more problems. Your insurance policy typically will pay for
any additional damage that's revealed. However, if you delay
repairs, your insurer may doubt the true cause of structural or
Don't expect your insurance company to pay for the additional
repairs later on if you can't prove the damage occurred due to the
accident, says Jim Klapthor, a spokesperson for Allstate Insurance
Co. "I don't see any economic benefit to having your car damaged,
filing a claim, receiving a check to fix it, and then not repairing
it," he says.
For example, it could be that your wheel assembly was damaged
and no one noticed, but continuing to drive the car caused you to
ruin the front end. In such cases, your insurance company can say
"no" to the additional cost of the repairs.
What if you have another accident and the same area of your car
is damaged? Your insurance company is going to try to determine
what part of the damage was from the first accident, Klapthor says.
It's not going to pay you for the same damage twice.