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Car insurance claims: Who gets the claim-payment check?

"Show me the money" is what you might say when an insurer pays to repair your car after an accident. After all, you've paid for your car insurance coverage and the insurer owes you the cash. However, the company may write you a check and tell you to "share the money." Who receives the claim-payment check often depends on who caused the accident.

First-party claim payments

If you cause an accident and have collision insurance, your insurer will pick up the repair bill after you've paid your deductible, up to your policy limits. This is known as a first-party claim situation. In first-party claims, car insurance companies have the right to pay whomever they deem necessary to settle your loss, subject to state insurance regulations. For instance, if you own your car, your insurer might issue a check made out to you and the body shop you've chosen to repair your car. However, some states, such as Massachusetts, have instituted a "direct payment plan" under which the claim is paid directly to you and you can then use those funds to pay for work done at the repair shop of your choice.

Practices vary by insurance company and state. Some insurers will make the check out to the repair shop and you. That's intended to cut down on fraud and to guarantee the repair of your car.

In first-party claim situations, you can't object to the repair shop being named on the insurance check if you've agreed to those terms within your car insurance policy.

Also, you might never see a check from the insurance company if you choose to have your car fixed at one of the insurer's recommended or preferred repair shops. Insurers have special relationships with these repair facilities, which may allow for direct payment from the insurer to the repair shop.

Those darn car leases

Car leases and loans can throw an extra wrinkle into the first-party claims-paying process because your insurer will likely issue a check made out to you and your leaseholder or lienholder. That means you have to go to the bank or, even worse, mail your check to the financial institution for its signature. There's no telling how long that can hold up the return of your fixed vehicle, but count on doing some extra legwork.

When a lienholder's name is included on the check, it creates the burden of having the lienholder examine the vehicle in order to get the check endorsed. It can take weeks to get the check endorsed.

Typically, you must bring the vehicle to a dealership and ask a representative to sign a statement saying the vehicle has been repaired. You must then mail the repair shop's bill, photos of your repaired vehicle and the check to the lienholder or leaseholder. The bank or lender will then endorse the check, send it back and you can pay for your repair.

If your lender is a local bank, you'll probably need to have a bank officer examine your car so he or she can make sure it was repaired. This process can be time-consuming. It might not hold up your vehicle's repair; but it may delay the delivery of your repaired vehicle. A body shop can repair your vehicle but it generally won't return it to you until the bill has been paid. If your car is totaled, the insurer again has the option of making the check out to you alone, or to you and your creditor.

Third-party claim payments

If someone else smashes into your car and his or her insurance company is paying for the repairs, you are a third-party claimant. This is typically less of a hassle than first-party claims because you have no obligation to that insurance company. The insurer can't dictate to whom it pays the money because it doesn't have a policy contract with you. In most third-party claims, insurers pay the claimant directly. For more, see What to do after a car accident that's not your fault.

If your vehicle has been totaled in a third-party claim situation, the at-fault party's insurance company will likely pay only you. Of course, if you have a lease or a loan, it's your responsibility to make sure your creditors get the money you owe them.

Knowing the claims-paying process can help expedite your repair and cut down on surprises. And, if you have a car lease or loan and make a first-party claim, you might do well to make an appointment ahead of time with a dealership or your bank for the inspection of your fixed car. That way, you can put the accident behind you, give the body shop its money, and get your car back.

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