Can I Keep Cash From an Insurance Payout and Not Fix My Car?

Last Updated on January 6, 2020

If your car insurance claim gets approved, you could receive a significant sum of money from your insurance company. It can be tempting to take this money and use it for other expenses in your life, particularly if you’re on a tight budget. There are some instances where you could keep the cash from your insurance payout, but it’s not always advisable. Here’s what you need to know about your insurance payout after your claim is approved.

Can I Keep Cash From an Insurance Payout and Not Fix My Car?

If You Fully Own the Vehicle, You Can Take the Payout

When you fully own your vehicle, this means that you will directly receive the money from your payout. In this case, you can do whatever you want with it – you don’t need to fix your car if you don’t want to. Many people will pay for initial car repairs out of pocket and then use the car insurance payment for other expenses down the line. If you don’t use your car often, you may opt to use the payout for something else and then fix your car later. This might make sense if you have other ways of getting around besides driving. However, it’s usually not the most prudent idea. We’ll discuss why further along in the article.

If You’re Leasing or Paying off the Car, the Money Will Go Straight to the Repair Facility

If you don’t fully own your car, you won’t have as much flexibility when it comes to your insurance payout. Typically, in this case, the money will go directly to the repair facility, or it could go to the car’s owner if you’re leasing. Even though you won’t get the money directly, you’ll still want to track your payout to make sure you get the money you are entitled to and that your repairs are covered. However, you won’t be able to use the money for something else. There are some instances where you will still receive a check directly from the car insurance company, even if you don’t own the car. However, you will still be required to use the money to pay for your repairs. If you don’t, you’ll likely be breaking your contract with your bank or your leaseholder, and you could potentially lose the car.

What Happens If My Car Is Totaled?

A common misconception that many people have is thinking they get to keep their car if it is totaled. When this happens, your insurance company will write you a check directly for the amount of money the car is worth at that point. However, you will not get to keep the car. If your car is still driveable, you can talk to your insurance company about keeping the car instead of getting a payout for your vehicle’s total value. This will depend entirely on your unique situation and the transportation options available to you at that time.

If your car is totaled and you still owe money on a car loan (or are leasing), then you will likely end up owing money either to the bank or the person loaning you the vehicle. Many car insurance companies offer something called “gap insurance” to pay for this. If your car is totaled and you owe money to someone for it, gap insurance will cover the difference so you don’t have to spend more money on a car you can’t use. While it’s not an essential form of insurance, it’s worth looking into if you don’t fully own your car. In many cases, it’s not much more expensive to add gap insurance if you already have a full policy.

Risks of Keeping Your Insurance Payout

Although it can be tempting to keep your insurance payout, there are many reasons why you should use it for your car repairs. Even if your car seems safe to drive, chances are it isn’t if you’ve been in an accident or incurred other damage. If you take it on the road, you could risk hurting yourself, your passengers, or the other people on the road. You could also risk causing more damage to your car, which means it will be more expensive to fix in the long run.

Car Payouts and Insurance Fraud

You should never fake a car accident or insurance claim in order to try and get a payout. This is considered insurance fraud, and insurers take it very seriously. When reviewing your claim, your insurance company will do an in-depth look at your vehicle as well as what happened to see who was at fault and make sure it was actually an accident. If there’s any indication that the claim was faked, it will be denied. This can also seriously affect your ability to get affordable car insurance later on. In many cases, the company will cancel your policy if you are caught trying to make fraudulent claims. If they don’t cancel your policy, there is still a chance that your car insurance prices will go up significantly. Although it can seem tempting to use your insurance policy to make a quick buck, it’s almost never worth the consequences.

If you own your car and your insurance claim has been approved, you will have some flexibility when it comes to what you do with your payout. However, it’s very important to make sure your car is safe to drive. If you don’t fully own your car, you won’t have as much control over the situation – you’ll be required to use the money for repairs.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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