Decreased value of the car. The minute you get your hands on the check from your insurance company, eHow says you actually have a choice in using that check to pay for the damage, to have it fixed or replaced, or not. However, do keep in mind that the value of your car drops whenever it’s got damages on record. Also, you can’t file for claims that mention the same damage a couple of times in a row.
Deductibles. A number of collision insurance claims aren’t settled, not unless you pay for the deductible on the policy. That means you have to shell out money that’s as much as your insurance deductible. If you don’t, you won’t be able to receive the check for the rest. It’s a measure plenty of insurance companies are resorting to, in a bid to ensure that car owners are using the money to repair their cars.
Failure to pass vehicle inspections. In some states, renewing your car registration includes passing a vehicle inspection. Failure to pass this can be traced back to a particular damage, one that you didn’t spend the insurance claim money on. By failing to use the claim money on the repairs you reported, you could end up with bigger problems down the road.
Insurance damage settlement. If the accident is caused by the other party, and the money is paid from his own insurance policy, then your insurance company doesn’t keep tabs on the settlement check you get. However, they do encourage, again, that you use those funds to have your car fixed.
Non-repair fraud. This only happens when you claim the check, use it on things other than the repairs and then file for another one, citing the same damage. However, if you take the check but don’t use the funds to restore your car to how it was, to pre-accident conditions, then that’s not fraud. It could mean bigger problems for you in the future, though.
Low quality repairs. Say you get the check and use it for the repairs. However, you wanted to save up on a few shekels in the process. So you kept the cash and did the repairs yourself. With enough training and know-how, this could actually work, Lifehacker says. However, if you don’t know the first thing about car repair, doing a hack job on your ride could affect its performance and even compromise your safety on the road. The same thing happens, too, if you use the funds but pick out cheap generic replacement parts instead of the OEM parts you need. So make sure before you buy any part or have it replaced with something else, do your research. Go only with brands you trust. Also, don’t forget to check which brands work great for your make and model and which ones don’t.
All in all, it’s seriously better if you just use the money for the repairs. You’ll worry less that way.