When you have an auto insurance claim, the process can sometimes be confusing, right down to who gets the check. Every step of the process as well as whose name is on the insurance claim check depends on several factors such as who caused the accident, who is paying the claim, and if there is a lien on your vehicle. Even with these factors made clear, different insurance companies have their own procedures which can differ from what is considered the norm.
When Another Driver is At Fault
If another driver is at fault in the accident, their insurance will have to pay for the damages and medical bills you have from the accident. When this is the case, you are filing a claim with the at-fault party’s insurance company as a third party. You are a third party because you do not have a contractual relationship with either the driver or their insurance company.
Because you are a third party in this case, and the insurance company has no responsibility to anyone other than you, the check will most likely be made out in your name, even if you have a lien on your car. You will then be able to cash the check and pay the repair and medical bills incurred from the accident.
When You are At Fault
If you are at fault, or if the vehicle damage is due to natural disasters or an uninsured motorist, your insurance company will be handling the claim. Your insurance company has obligations to parties other than yourself. They keep records of who owns the loan on your car and the minimum coverage they require. The insurance company works with the financer to make sure that you are adequately covered and the car’s damage is paid for.
Because your insurance company has an obligation to the lien holder as well, the insurance claim check will often be made out in both your name and the name of the lien holder. If your car is totaled and the insurance claim check is only enough to cover the loan, the check may be made out to the bank alone. This really depends on the insurance company and its procedures.
What to Do If The Check Has the Bank’s Name
If your car can be repaired and the claim check has both your name and the name of the bank on it, you’ll have to get a representative of the bank to endorse it with you before you can cash it and pay the repair bills. This is done to try to ensure that you do indeed use the money to pay for the repairs, largely because the car does not fully belong to you.
If your car has been totaled and both your name and the bank’s name is on the check, you will need to sign the check and send it to the bank. The bank will then cash the check and apply the amount to your loan balance. If your loan balance is lower than the amount of the claim check, the bank will issue you a new check with the overage.
What You Should Do With Your Claim Check
Regardless of whose name is on the auto insurance claim check, you have some responsibilities in handling the money. If your car can be repaired you should use the money only for repairs, unless you are able to get the repair done for less than you were awarded in the claim, which is rare.
If you do not use the claim check to make the repairs on the car you could be in trouble with both your bank and the insurance company. If you have damage to your car later, the insurance company can refuse to pay for the repairs on the grounds that you didn’t do the repairs previously. If there is any doubt as to whether damage is from a previous accident or the current one, it won’t be covered. If your car is later repossessed by the bank, you can be held liable for damages to the vehicle that were not repaired in good faith.
If your car was totaled, you have a responsibility to pay off the loan for your vehicle. If you do not pay off the bank with the claim check, you will be in breach of contract. If you own your car outright, you should use the claim check to purchase a new vehicle. You can either purchase a vehicle outright or use the money as a down payment on a newer car.
If you are ever unsure of what the process is for claims with your auto insurance company the best thing to do is ask the company directly. Your auto insurance policy documents will give you some clues as to your obligations and how the claims process will unfold.