- If you have an outstanding loan on your vehicle, you may have no choice except to use the settlement money to repair your vehicle. Often, your insurance company is obligated to put your name as well as the lender's name on the check, or at least your name plus a repair facility's name in lieu of the lien holder. If your insurer insists on this, there is no way around it. You may avoid this problem by filing a claim with the other party's insurance company if he was at fault for the accident.
- Depending on how your vehicle was damaged, you may not want to avoid the repairs. If the structure, suspension or steering components were damaged, the vehicle may not be safe to drive until the repairs are completed. If you choose to avoid the repairs anyway, you may be putting yourself and other drivers on the road in danger. As tempting as the settlement money may be, sometimes repairing your vehicle is the only sensible option.
- Normally, property damage settlements like auto insurance are not taxable because the money you receive does not represent a financial gain. Auto insurers reimburse you the actual cash value of the vehicle, so theoretically you never receive more money than the amount you spent to acquire the car in the first place. However, if you have depreciated the car on your taxes, or somehow do receive more than your investment amount, you may owe taxes on the portion of the settlement that constitutes a financial gain unless you reinvest it into vehicle repairs.
- If none of the above concerns pertain to your claim situation, you are free to keep your settlement money and use it however you wish. Your insurer is obligated only to pay you the reasonable cash value of the damage your vehicle sustained. Typically, it costs insurers less money to simply cash out your claim, because they do not then have to monitor the repair process. Your settlement money is ultimately yours.
previous post