A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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Important Facts to Know

  • If you’re declared to be the at-fault party for a loss, you must carry physical damage coverage if you want your insurer to pay to restore your vehicle to its pre-loss condition
  • If your vehicle isn’t a total loss, you’ll be issued a settlement check that’s meant to pay for the total cost of repairs minus your deductible
  • When cars suffer severe damage that makes them unsafe to be driven, the insurer will require that you get repairs done to make the vehicle road-ready
  • If your vehicle only has cosmetic damage like dents or scrapes, you can choose to cash the check and lose the resale value
  • In most cases, the insurance company will ask for proof that repairs were made if you’d like to keep physical damage coverage on the car
  • Policies on financed cars have a loss payee listed. Because of this, you might not be able to keep the insurance money if you have a lender that has to sign off on your claims check.

If you look at all of the vehicles parked in a public parking lot, you’ll see vehicles in pristine condition and others that have literally been dragged through the mud. Dings, dents, scratches and peeling surface paint are all visible signs of damage that show a vehicle has stood the test of time. While wear and tear is common, you’ll stumble across vehicles that have quite obviously been damaged because of a wreck and not just wear and tear. This will leave you wondering whether or not the owner had insurance or filed a claim after their encounter with a car, lamppost, fence, house or even deer. Start comparing car insurance rates now by using our FREE tool above!

Auto insurance is not just a product, it’s an agreement between you and an insurer. By paying the premiums you’re quoted, the insurer agrees to payout for each type of coverage you elect to carry. If you elect to carry physical damage, the insurer will pay to restore your car back to its pre-loss condition after a host of different types of claims. The money may be sent to you or to a repair shop directly. If the money is sent to you, you could be left wondering if you really want to part with the cash just to repair a cosmetic eyesore. Here’s what you need to know before you pocket your claim money.

Does the basic policy provide coverage to fix your car?

While statistics say that 12.6 percent of cars on the roads nationwide don’t have coverage, a majority of cars do. Out of the cars that are insured, an analysis shows that between 22 and 28 percent of policies have liability only. These policies will provide coverage, but only to third-party drivers who suffer damage in a loss. In this event, you’ll pay for your own repairs as long as you’re at fault.

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What will happen if you’re not at fault for the loss?

If you have a basic insurance policy, that doesn’t mean that damage to your vehicle won’t be covered when you’re the victim of someone else’s actions. If you’re less than 50 percent at fault for the car crash, the at-fault party’s insurance policy will pay for the repairs that need to be made to your vehicle under the policy’s Property Damage Liability coverage.

How does a third-party insurance claim work?

A third-party car insurance claim is a claim that’s filed with another person’s auto insurance company. If you’re obviously not to blame for the loss, you may decide to file a third party claim by dealing directly with the other company.

Filing a third party claim can put you at risk of receiving a less than fair offer, but it’s a choice claimants make on a regular basis.

If the claim has been investigated and you’re offered a settlement to pay for your repairs, you’ll be asked to sign a form that’s called a ‘release for damages’. Once this release is signed, you’re giving up your rights to make future claims against the driver and you’ll be issued a settlement check. In most cases the check will be made out to you and not a repair shop.

Do you have to use the third-party claim check to repair the damage?

When you’re mailed the check for the amount you’ve agreed upon, you can decide if you want to use this check to fix the car or if you want to deposit the money in your savings. It’s your legal right to forgo making repairs and to take the hit on your resale value. Just be sure you only choose to skip the repair shop when the damage is fully cosmetic. If the vehicle isn’t roadworthy because of the damage, you’ll need to put some or all of the money into the car.

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What if you make a claim against physical damage on your own policy?

If you do choose to buy comprehensive and collision coverage, you can make a claim against your policy to restore your vehicle to its condition before the accident ever happened. Once you get the estimates and you’ve decided that you can live with the damage, you might be tempted to cash your check and use it on something a bit more enjoyable than paying a body shop. If you own your car outright, you could have the right to do this. Just know the decision to keep your settlement money could affect your future claims.

What if there’s a lien on the vehicle?

If you’re financing your car and you still have payments left, you aren’t free to make the decisions you can when you own your car outright. Lenders require you to list the company under the policy as a loss payee. This means that there’s a lien on the policy that guarantees that the bank is entitled to receive claims payments before you. Since the check is made out to the bank, you’ll have to get a sign off before you can use the money. The bank typically signs the check off to go to a repair shop so that they know their collateral will be repaired.

The Insurer May Drop Your Physical Damage Coverage

One of the consequences of choosing to forgo repairs is that you may be deemed ineligible for physical damage coverage in the future. Companies don’t want to insure a vehicle that has existing damage. If carriers did this, they’d be paying for damage twice.

This is why you must show the repairs have been made to keep full coverage on the car.

If your concern is about keeping your car’s value in line, use your claims check to get repairs done. When value isn’t a concern of yours, you can keep the cash and use it as you may. Make sure that you know the ramifications of your choice either way. Vehicle owners who have filed claims should always price the cost of insurance before starting a new policy. Use an online tool for comparison shopping and begin coverage with a company you can trust. Compare car insurance rates now by using our FREE tool below!