Question: If you have an accident and want the car insurance company to pay you directly could they turn around and say that they will only pay the body shop after repairs? What if I know a qualified mechanic who does not have an approved garage. Can I not have the money from the company and pay him myself cash if it will work out a lot cheaper? What would be the reason for auto insurance companies refusing to pay the policyholder directly for the damages?
Answer: They may not argue with the policyholder for small claims and they may just send the check for the repairs direct. They actually like to go ahead and do this because they don’t want to waste time and money on checking repairs and body shops. Anything above $2000 would make it hard and auto insurers can refuse to pay directly to the policyholder for the repairs to be carried out. They would most likely prefer to pay the repair shop on confirmation that works are done.
There are at least couple of reasons to think of why they would choose this option. The first one is that you may have a lien-holder listed on your policy. If an auto loan lender has an interest on your car (because they lend you money to buy it) they would want to make sure that the car is repaired in cases of accidents. So, they would not be happy if the insurer hands over the cash to you and you don’t carry out the repairs. The only way an auto insurer may be happy to send you a check in this case is that if you get a consent from your lender that it is acceptable for them to pay cash instead of paying to the repair garage. Good luck getting that confirmation.
Also, they may only do so by issuing a check that is made out to you and the lender jointly. One of you has to sign it over to another. Again, good luck getting the check signed over to you by your lender if you don’t confirm that the repairs are done competently.
Another reason would be that auto insurance companies have an interest in the safety of cars they insure. After they pay you off for your claim they are likely to carry on insuring your automobile. Therefore, many companies may choose not to pay the policyholder directly for repair claims over $2,000. They don’t want you to be running the car that is not repaired at all or not repaired properly.
In most cases, you can choose the repair shop you want and companies will pay them directly. Some of them may not see the fuss about who gets paid as long as repairs done. And they may want a plausible explanation from you as to why you would want to be paid directly. Companies gets uneasy when their policyholders ask something out of the ordinary. They don’t want to be the ones who are facilitating you to do something that is not acceptable.