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Who receives the claim-payment check often depends on who caused the
accident. Knowing the claims-paying process can help expedite your repair
and cut down on surprises.
First-party claim payments
If you get into an accident and have collision
insurance, your insurer picks up the repair bill after you've paid your
deductible. This is known as a first-party claim situation. In first-party
claims, your insurance company has the right to pay whomever it deems
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 amount of 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 company and state. Some insurers make the check out to
the repair shop and you. That's intended to cut down on fraud and guarantees
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 auto 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 lien holder. 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. 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.
When a lien holder's name is included on the check, it creates the burden
of having the lien holder examine the vehicle in order to get the check
endorsed. It can take weeks to get the check endorsed. Typically, you have
to bring the vehicle to a dealership and get it to sign a statement that the
vehicle has been repaired. You then have to mail the repair shop's bill,
pictures of your repaired vehicle, and the check to the lien holder 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 they can make sure
it was repaired. 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.
This process can be time-consuming, but it might not hold up your
vehicle's repair; however, it might delay the delivery of your
repaired vehicle to you. A body shop might repair your vehicle but it
generally won't return your vehicle until it's gotten paid.
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.
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.
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