How do car insurance companies pay out claims?

When your claim is approved you can receive your car insurance claim money directly, or you can have the insurance company send it directly to the repair shop.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 14, 2020

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Here's what you need to know...

  • Companies vary on their claims procedures.
  • The most important piece of information necessary when filing a claim is a police report.
  • The easiest course for all parties is when the insurance company pays the repair shop directly.

How you receive your car insurance claim money will depend on the car insurance company and who is paying the claim. There is no law set to establish how insurance companies process claims and payments. Rather, each company will pay per policy or per company procedure.

If you are dealing with your car insurance company you may receive your claim money one way, but if you are dealing with someone else’s car insurance company then you may receive your claim money another way.

Read on to learn the various ways that you might receive your auto insurance claim payment and then be sure to enter your ZIP above for a FREE online car insurance comparison!

Information Needed When Filing a Car Insurance Claim

The most valuable information that you can have available following an accident is a police report. Most of the time, this is the only piece of evidence that an insurance company will need to process a claim.

The police report will have all the details of the accident, including:

  • pictures
  • details
  • accounts from witnesses

In addition, all involved parties must sign an affidavit when a police report is filed after an accident.

Other information that may be important to have, especially if a police report is not available, is:

  • the type of vehicle
  • license plate
  • name of the driver of the other car

If you are involved in a hit and run, do your best to simply get the license plate number from the other car.

If you are trying to learn about insurance companies and how they stack up against each other when it comes to customer reviews, visit the website for Consumer Watchdog.

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Receiving Cash or Check for Claim Money

In a dream world, when you submit a claim to your insurance company they open up their checkbook and write a check to you for the full value of the assessed damage. Done. In the real world, that is not always the case.

There are insurance companies who will send a claims adjuster to assess the damages and may even request a few body shop estimates for review.

Once the total amount of damage is determined, the insurance company will write you a check for that amount and send it directly to you. At this point, you are free to do whatever you want with your insurance check.

You can fix your car or leave your car damaged and use the money however else you see fit. Even though the insurance check was intended to repair your car, there is probably no clause in your policy dictating that you have to use it as it was intended.

There are a couple of caveats to receiving the check straight up in this fashion. The first is if your car is leased or financed, then you will have no choice but to repair the car to its original condition since you are not the title owner.

You have an obligation to keep the car in its expected condition for its proper value until you own the car outright. Once the car belongs to you, there is no longer a responsibility to anyone else regarding the appearance and mechanics of the car.

Another thing to be wary of is to make sure that even though you received the check and cashed it there is still recourse if further damage is uncovered.

As thorough as body shop estimates are, they are called estimates and not called quotes for a reason. Mechanics can never be certain of what they will find once they start taking a car apart and repairing it, so expenses can become quite costly once the work begins.

Receiving a direct check for your car insurance claim money can be beneficial, but it depends on the circumstances at hand and what type of policy you have. Other claim payment methods may be better for you if you are given the option.

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Receiving Reimbursement for Claim Money

Some insurance companies reimburse you for your claim money based upon finalized invoices from car repair shops or body shops.

While this could be a good way of making sure there are no surprise balances after the work is complete, it can also be risky on the part of the insured.

The first concern is that if you do not receive insurance money until after the work is completed, then it is very likely that you will have to pay the body shop at least a portion of the estimated amount upfront and out of pocket.

The second thought of concern is related to your insurance company’s financial strength to back up your claim. Insurance companies can go bankrupt and not every company is reputable.

Even though they are obligated to pay a claim per policy, it is not always a simple task to collect monies owed, even with legal rulings. This could leave you out of pocket for the entire claim amount.

Receiving reimbursement for claim money may not be the ideal method. If you have minor repairs that will not hurt you out of pocket and you have a good relationship with your insurance company, it may be okay.

Insurance ratings are available for all insurance companies, so finding an insurance company with an A++ rating is very beneficial.

Direct Pay of Claim Money to Body Shop

One of the best ways to receive car insurance claim money is by just not receiving it at all. Many insurance companies work with a network of body shops and car repair centers nationwide.

These same insurance companies are usually willing to allow a non-approved body shop to perform the repair work provided their conclusions and estimates are in the same ballpark as the claims adjuster.

This allows you to have your car repaired by a reputable body shop and not have to worry about finances at all.

It is your responsibility to initially pay the body shop for the amount of your deductible, and then after that, all installment payments and invoices are handled directly by the insurance company.

An insurance company directly paying your claim money to a body shop is the least risky venture for all parties involved.

It reduces a lot of administrative time, negotiating, and concern. Provided you are comfortable with the body shop you choose to do the repairs; you do not have to worry about getting multiple estimates for comparison sake.

As long as your car is repaired to its pre-accident condition per your insurance policy, then you have nothing else to worry about. Your car insurance company is paying your claim, and you are receiving a repaired car.

Reading customer reviews on various aspects of claims processing can tell you a lot about an insurance company. For example, you may get a glimpse of how easy it is to submit a claim or how long it took to get a claim approved.

You may also find out how fast an insurance company pays its claims and how friendly its customer service is.

One of the most important attributes of a good insurance company is its claims handling. To get FREE quotes now from car insurance companies, enter your ZIP code in the online quote tool below!

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