If someone handed you a check today, what would you spend it on? Maybe you’d pay your mortgage, make a trip to the grocery store or sock it away in an emergency fund.

Many people are getting checks and doing just that — except the checks are for car insurance claims and were meant to pay for car repairs.

Since summer 2008, an ever-increasing number of people with car insurance claims are choosing to pocket the money rather than pay for repairs — an action called "cashing out."

"Customers can and do pocket their claim amount instead of fixing the car. That’s the customer’s choice," says State Farm spokesperson Dick Luedke.

State Farm doesn’t track whether claimants ever get their repairs done, but Dan Young, senior vice president of insurance relations for Carstar, is on the front lines of car repair and has seen a significant increase in the number of drivers who are cashing out their insurance claim checks. There are about 280 Carstar collision-repair centers in the United States and its centers repair about 21,500 vehicles every month worldwide, or about one every 30 seconds.

"When times get tough, and a check is issued directly to the customer, then they have a decision to make: Do I repair my car or use money to pay for other life expenses?" says Young.

Tom Webb, Chief Economist for Manheim, which conducts wholesale vehicle auctions around the world, confirms that he has seen a trend in vehicles coming in for auction that are in rougher condition.

Young has also observed an increase in people who can’t afford car repairs, even when they have insurance checks in hand, because they chose high policy deductibles that they can’t pay. This problem is most notable among customers who have insurance deductibles of $500, $1,000 or more. Choosing a higher deductible lowers your car insurance premium, "but people don’t put it into a ‘what if I have an accident fund,’" says Young. "Often times today, someone doesn’t have $1,000 for the deductible payment, so they can’t get the car repaired."

Car owners who cash out may find that the final bill ultimately escalates.

"Many times, the [initial] estimate given does not cover the full repairs because when you tear the car down there’s hidden damage — like the engine or something on the wheel assembly," says Young. "If you receive the check and don’t have the car fixed, it happens often that there’s additional damage that’s not discovered. And this leads to problems down the road."

For example, mechanical problems related to damage may not manifest until 60 or 90 days after a crash.

The longer you go without getting a repair, the harder it becomes to make an additional claim for problems that appear later that are related to the accident. For example, if you experience mechanical trouble two months after an accident for which you never completed repairs, it will be hard to trace the accident as the origin of your new trouble.

Then there’s the problem of multiple damage to the same spot. Say you have a fender-bender that puts a dent in your right front bumper, but you cash out your insurance check. If you later incur more damage in the same area, your insurance adjuster will have a heck of a time trying to figure out how much to pay you for the new damage.

Luedke of State Farm says, "We would simply do our best to determine what damage was caused by the second accident and repair that damage, or pay for the damage."

Young says that if the origins of multiple damage are murky, a car insurance company may ask the policyholder to share the cost. Or, worse, "the insurance company might come back to you and say that until it is repaired, you may have to remove collision coverage. They don’t want to be in a position where they pay for the same damage twice."

Not everyone with a claim is handed a check that can be cashed out. If you use a repair facility recommended by your insurer, called a direct repair facility, the insurance payment goes directly to the facility. If you finance or lease your vehicle, the insurance company will likely make the check out to you and your lender, which forces you to spend it on repairs. However, if you own your vehicle outright, or if someone else caused an accident and you’re a third-party claimant, you’ll likely get a check in your name.

Young says that drivers who cash out could be sacrificing safety in addition to resale value.

Paul Taylor, Chief Economist for the National Automobile Dealers Association in McLean, Va., says that leaving accident damage unrepaired is "generally not a profitable strategy."

"A short-run cash flow advantage causes detriment to the total ownership cost of the vehicle," Taylor warns.