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What to do with car insurance claim checks

An Asian woman sits down on the phone after receiving her claims check.
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If you have filed a car insurance claim, you have probably received a claim payout check to help you recover financially after the unexpected happens. But receiving your payout is not always as simple as taking the check to the bank. There are numerous ways that an auto insurance claim check can be made out. Understanding how to handle each situation could help you speed up the financial recovery process after a claim.

How does car insurance payout work?

Insurance claim check cashing can be a grey area, especially since there are not always instructions explicitly stating how the check can be used. While there are multiple ways that a claim check can be handled, it will generally be made out to the individuals primarily responsible for seeing the repairs through. This could be you, the repair shop, your lender or multiple parties, depending on your situation and your auto insurer. If you have questions about your claim check and how to handle it, talking with your insurance adjuster or claims representative could be a good first step.

The check is made out to two parties

If the car insurance claim payment came from your insurance company, you might receive a check written out to you and the approved body shop. Auto insurers tend to issue two-party checks to reduce the chances the funds are used for something other than the intended repair. However, the check is not always written to you and the mechanic. In some situations, such as a total loss, the check might be written out to you and your lender, known as the lienholder, and you will be expected to pay off your auto loan with the funds.

In either case, you can determine what to do with a two-party check by checking whether the names include “and” or “or.” If “or” is present, you should be able to cash the check alone. If the names are joined with “and,” you may be expected to complete the repairs at the named body shop by signing the check over to them.

The check is made out to a lienholder

If an auto insurance claim check was made out to you and your auto loan provider, you may not be able to access the funds from the check by yourself. Because it includes both of your names, the check will likely need to be endorsed by you and your lender. Once the check has been sent to your lender and has the appropriate signatures, it can then be cashed and used to pay off your car loan.

But what if the check was for a repair rather than a loan payoff? Here is where things can get time-consuming. You will need to get the lienholder (or leaseholder, if it is a lease) to sign the check, which could take weeks if handled by mail. The process typically follows these steps:

  1. Send the lienholder the check.
  2. Have the vehicle repaired.
  3. Take your vehicle to a dealership when repairs are complete and ask a representative to inspect the repair and sign off on it.
  4. Send the lienholder the statement from the dealer, repair bill and photos.
  5. Wait for the lienholder to review your documents, sign off on the check and mail it back to you.
  6. Cash the check and pay the repair shop when you receive it.

Can you keep a check from car insurance?

Although using your full claim check for the necessary vehicle repairs is an obvious choice for your payout, it is not always the only option. However, determining whether you can use your payout for other purposes depends on a few factors, mostly tied to how the check is issued.

The check is from a third-party claim

Generally, you have the most flexibility when the claim check comes from another responsible party’s insurance company. For example, if you were in a not-at-fault accident and the other involved driver’s insurance issues a check for the damage, you may be able to decide how to use that money. You will probably need to show an estimate for the damages prior to receiving money from any auto insurance provider, however, so you will likely want to use those funds to fix your vehicle.

Keep in mind that if you are leasing the vehicle or have a loan, your lienholder may have stipulations for how the check can be used and may require proof that the damage was repaired. And if your vehicle was totaled and you are receiving a check for the loss, you will be responsible for paying your lender the money owed to them to close out the loan.

The claim check is more than the repairs

In some cases, your claim check may end up being more than the total cost of repairs needed for your vehicle. What happens with the excess funds depends on how the check is made out. Sometimes, your insurance company will require proof of repair, in which case the check may be made out to both you and the approved auto body repair shop up to the designated amount. The repair shop is generally expected to complete repairs per the allotted estimate — if there are remaining funds, the difference will usually be insignificant.

If, instead, you decide to go with an independent repair shop and the total cost of your repairs is less than the claim check made out to you, you might be able to keep the difference in most cases. However, because you cannot claim the same damage more than once, it is essential to ensure all necessary repairs have been made. If the leftover difference between the claim check and repair cost is steep, it may be worth double-checking that your vehicle has been fully repaired according to your insurer’s claim agreement.

What are the major differences between state laws?

Every state has its own insurance regulations, including how claims are paid out. Some states, like Massachusetts, allow for direct claim payments to be made to the insured in the form of a check. This money can then be used to pay for repair work at an auto body shop of their choice. Otherwise, insurance companies often reduce claim check cashing fraud by using two-party checks made out to both the insured and repair shop to ensure the funds are used for the damages claimed. Be sure to check your state’s laws regarding insurance or consider speaking with an agent to verify how your state handles claim payments.

Frequently asked questions

Can I spend less than what I was paid by the insurance company for a car repair?

You may find that an independent shop can repair your vehicle for less than an insurer-preferred one. It is unlikely that you will pay less for your vehicle repairs than the insurance company provides, because you will need to provide an estimate to your auto insurer prior to receiving funds, regardless of the repair shop you choose. If the check is written solely to you, you will not have to have the repair shop co-sign to cash it and pay for the repairs, but you would not be able to file a claim for the same damages again if you do not get your vehicle repaired properly the first time.

What is a two-party insurance check?

A two-party claim check has two people or entities named as the payees of the check. Insurance companies will often write the check out to two parties to ensure the money is used for its intended purpose. The policyowner will very likely be one of the parties on a claim check. A second party could be a lienholder, a leasing company or a body shop.

What if I do not want to deal with an insurance check with a lienholder?

If you have a loan on your vehicle, your claim check may be written out to both you and your lienholder, especially if your vehicle was determined to be a total loss. When you have an auto loan, you do not fully own your vehicle — your bank also owns it. This means that it is unlikely you will be able to convince your insurance company to make your claim check out to you solely. The best way to ensure that a claim check is not made out to both you and a lienholder is to pay off your vehicle and remove the lienholder from your policy.

Do I have to use a claim check for car repairs?

It depends. If you have a loan or lease on your vehicle, your check will likely be made out to both you and the lienholder, leasing company or a body shop. You will likely need the second entity on the check to sign off so that you can cash it, which means you will probably be required to use it for repairs. However, if the check is made out solely to you and the damage is cosmetic — dents from a hailstorm, for example — you may be able to keep the money without repairing the vehicle. Bear in mind that you will not be able to receive insurance money for the damages in the future.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor
Reviewed by
Director of corporate communications, Insurance Information Institute