I recently was directly paid for hail damage to my car. If I don't
get the car repaired, can they take the money back? Is it fraud to
use the money from a hail damage claim for something other than
fixing the car? There is still a lien on the car.
In general, when you make a claim against your own auto insurance
policy, you can choose to "cash out" and receive money as
compensation (minus your
) instead of having your insurer pay a body shop to fix your
The insurance company has met its obligation by paying the
repair costs for the damages that they found. They shouldn't take
the money back or consider it fraud if you don't use the money to
repair the vehicle. What would be fraud to your insurer is if in
the future you filed another claim for the same damage.
However, if you don't own your car outright but instead have a
loan or lease on it, then you aren't totally in control of how your
claim payout can be used. If you tried to keep the money from
for hail damages, your lien holder is going to take issue with you
that their asset is not being repaired. (See "
Hail claims: What you need to know
Most lenders require you to place them on your auto insurance
policy as an
so that the insurer will issue any check for repairs (or the
totaling of the car) to both you and your lien holder.
To cash a claim check made out to both of you, normally you'd
endorse the check and send it onto the lien holder, who will may
require you send documentation that the repairs were made to the
vehicle (such as a copy of the repair bill and photographs of the
repaired car) before they will sign over the check to you or a
If you cashed a check made out to you and the lien holder
without their endorsement (or by forging their signature), then
this could be considered fraud and get you into a lot trouble.
If the check were made out only to you, your finance agreement
would still normally require you to notify your lien holder about
the damages and insurance payout. Most lenders would mandate you to
use the money for the needed repairs; however, you can discuss the
issue with your particular lien holder.
If the hail damage isn't that extensive and your loan is almost
paid off, or if you plan on using the claim money to pay off the
loan, then your lien holder may not require you to get the repairs
made. Don't be surprised, though, if they demand that you fix the
If your lien holder does allow you keep the money and skip the
repairs, remember that this now pre-existing damage the insurer
will take into account if your car sustains damage in the future.
Your insurer will deduct for this previous damage if the car is
damaged in the same area or if the car is totaled out.