Who Auto Insurance Claim Check Will Be Made Out To

Money In Your Pocket
••• Getty Images/Peter Dazeley

Details. Details. Details. As much as you may not like it, details are what auto insurance is all about. If you've ever actually read your policy (and shame on you if you haven't) you know that auto insurance can be very complicated, especially when it comes to your claim. There's really no way around it, though. It's complicated by nature. One of those details has to do with who actually get paid when a policyholder makes a claim.


Who Is Paying the Claim

There are a number of basic factors involved in the "who gets the money" question. The first has to do with who is actually paying for the damages. This depends almost always on who caused the accident (Michigan check here). If the insured (that's you) is at fault, then your insurance company will be footing the repair bill.

But what if it's the other driver's fault? In that case, it's the other driver's insurer that's on the line. This is what is known as a "third-party" claim. That is, you, the damaged party, are seeking payment for your damages from the at-fault driver and his or her insurance company, two parties with whom you have no contractual agreement. Hence the term "third-party."

Since there's no contractual agreement, the at-fault driver's insurance company has no obligation to pay anyone other than you, so the settlement check should be made out in your name and your name alone.

By the way, this is normally the case even if there's a lien on your car. Now, onto the case where your insurance company is paying for the damages.

When There's a Loan on Your Car

This is where things can get a little complicated. First of all, remember that your insurer knows that there is a loan on your vehicle and maintains information on that loan.

Therefore, when a policyholder makes a claim for damages, the insurance company will normally make the claim check out to both the insured and the lien holder. The reasoning is pretty simple. Since the lien holder continues to have an interest in the insured vehicle, it wants to be sure that the claim payment is actually used on repairs and not on a policy holder's new ultra-HD TV or vacation in the Bahamas. So, when the insured receives the claim check from the insurance company, he or she will need to get the lienholder to sign the check in order to cash it and pay the repair shop. If your vehicle is a total loss, then the insurance company will write the check for the vehicle's ACV (actual cash value) minus your deductible, and send it to you. You will then sign the check and forward it to the lender to pay off the loan.

When You Own Your Car Outright

Of course, if you own your car outright and there is no loan involved, the insurance company will write the check directly to you, and then it's off to the Bahamas if you want, I suppose. But there is one very important thing to keep in mind. If you decide not to use the proceeds from your claim payment to fix your vehicle, you are likely to run into some trouble with your insurance company if you get into another accident.

That's because they will not pay you for any pre-existing damages. In other words, the insurer will make a determination as to whether damages to your vehicle were caused by the most recent accident or were there before. And you can bet that if there is any uncertainty, they will attribute the damage to the prior accident and refuse to pay. Who can blame them? They paid for them once already and if you decided not repair your car with the proceeds, that's your problem. So, if you are thinking about not fixing your vehicle when you get your claim check, you might want to think again.