Would Car Insurers Pay Repair Claims Directly to Policyholders?

Auto insurance companies may be happy with repair estimates they received from the policyholders, especially if they are for minor work, and send the claim payment to the policyholder directly, if the vehicle is owned outright. Then, it would be up to the vehicle owner to get the repairs done within the budget. The insurer wouldn’t accept follow up claims or requests of additional payments.

On the other hand, the policyholder may decide to keep the money for other things and delay the repairs. This may be an accepted practice if the damages were just cosmetic and the vehicle is still usable. However, some companies may actually want to see a confirmation from a body shop that the work is done. Otherwise, they may refuse to provide physical damages coverage from the renewal but it may be reinstated if the works are completed at a later date.

Essentially, auto insurers want to make sure the vehicle is repaired properly because they still insure the automobile. Also, most of them have their preferred repair shops and may want to direct the policyholder to those garages. If this is the case, they would settle with the body shop directly after the repairs are done and the policyholder would pay the deductible.

The advantage of the insurance approved body shop is that the vehicle would be repaired and the carrier would cover even the additional works if the damages are more than initially estimated. Also, they would guarantee the work so they would carry out any follow up repairs in relation to the initial works.

In case of larger damages, it is unlikely that the insurers would release the funds without an invoice from the garage for the works done. At best, they may actually issue the car insurance claim check in the name of the body shop or jointly with the policyholder. Insurers wouldn’t want to take a chance with an unsafe car to be driven on the roads.

If the vehicle has a loan or lease, many states and lienholders may insist that the lienholder’s name is listed on policies. In such cases, auto insurance claim checks would be issued for both names. Then, the policyholder would need the lender or lesser to sign the check onto them. Some lenders may release the money and many others would hold onto the payment and release it only after confirmation of the repairs.

Few states may require insurers to pay the policyholder. Even then, people would contractually have to tell their lenders about the claim payment. Otherwise, they would be breaking the contract. In cases of leases, they may have to pay for the damages or penalties at the end anyway.

Another issue with not getting the repairs done and spending the money for other things is that insurance companies may refuse a similar claim on the basis that old damages are still there and they cannot tell which one is old and which are new damages. Also, they may pay less if the vehicle is totalled at a later date for another incident because the auto was already damaged.

It is not illegal for a policyholder to receive a vehicle insurance claim payment for repairs and decide to use the money for other things, as long as they know the above-mentioned issues. In addition, they may get the repairs done cheaply or do it themselves and keep the difference between payment and costs.

The insurance company was allowed to see and price the repairs. They chose to settle by sending the claim payment directly to the policyholder. The company isn’t responsible for the repairs anymore and the vehicle owner is free to decide what to do with the money or the repairs.