What happens if you keep auto insurance claim money instead of making repairs?

Why you can trust Insure.com

Quality Verified

At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry.

When your car is damaged in an accident, filing a car insurance claim is often the first step toward getting it repaired. However, some policyholders may decide to keep the claim money instead of making the necessary repairs.

In most cases, once your insurance company issues a payout for your claim, you can use that money as you see fit. This means you could choose to save the funds for future repairs, invest them elsewhere, or even use them for other financial needs. However, while this might seem like a convenient and flexible option, there are consequences.

If you keep the claim money without making repairs, you may face complications with future claims. Insurance companies may deny subsequent claims if they find the original damage was never fixed. Additionally, your car’s value could decrease, and safety may be compromised if the damage affects the vehicle’s functionality.

Can you keep insurance claim money? What you need to know before skipping repairs

Legally, you are allowed to keep the claim money instead of using it for repairs. However, keeping the claim money rather than repairing your vehicle comes with potential consequences.

Firstly, if your car has a lienholder or is leased, the insurance company might issue the payment directly to the repair shop or require you to use the money for repairs. Failing to do so can violate the terms of your loan or lease agreement. Additionally, skipping repairs can lead to complications with future claims. If your car is involved in another accident and the previous damage was not repaired, the insurance company might refuse to cover the new damage or reduce the payout, citing pre-existing conditions.

Moreover, not repairing your vehicle can affect its safety and resale value. Unfixed damage can worsen over time, potentially leading to more significant issues and higher repair costs in the future. Additionally, when you decide to sell your car, buyers may be deterred by visible damage or lower their offers, knowing they will need to cover the repairs themselves.

Pros and cons of pocketing auto insurance claim money instead of repairing your car

When considering whether to keep your auto insurance claim money rather than using it for repairs, it’s essential to weigh the pros and cons. Here are some key points to consider:

Pros:

Immediate financial relief: Keeping the claim money can provide instant access to funds that might be needed for other pressing financial obligations or emergencies.
Flexibility: You have the freedom to decide how to use the payout, whether it’s for future repairs, investments, or personal expenses.
Cost efficiency: If the damage is purely cosmetic and doesn’t affect the vehicle’s functionality, you might choose to save on repair costs altogether.

Cons:

Future claim complications: Insurance companies may deny subsequent claims or reduce payouts if they discover that previous damages were not repaired.
Vehicle safety: Unrepaired damage can lead to hidden issues with critical components like brakes, wheels, or the engine, compromising your car’s safety.
Decreased resale value: A car with visible or known unrepaired damage can deter potential buyers and significantly reduce the vehicle’s resale value.
Loan/lease violations: If your car is financed or leased, keeping the claim money instead of making repairs might violate the terms of your agreement, leading to penalties or other complications.

By carefully evaluating these pros and cons, you can make a more informed decision about whether to pocket your auto insurance claim money or use it for necessary repairs.

Why using your claims check to repair your car is a smart move

Alongside the points made above, safety is a significant concern for cars left unrepaired. While the damage from an accident may appear minor, hidden issues with critical components like brakes, wheels, or the engine may be lurking beneath the surface. Continuing to drive an unrepaired vehicle can exacerbate these problems, potentially leading to more severe and costly repairs down the road, and compromising your safety on the road.

Ultimately, deciding whether to use your auto insurance claim money for repairs or to keep it is a personal choice — just be sure you’re aware of the potential risks and implications before making your final decision.