Oops! I Spent Insurance Money for Auto Repair on Other Stuff
About a month ago I had a fender bender with my car, a 1999 Ford Taurus. It wasn’t my fault. Fortunately, there wasn’t much damage and there were no injuries. I signed a release and settled quickly with the other guy’s insurance company. They wrote me a check for $844, the amount the auto repair shop said it would cost to fix. The next day I put the insurance check in my bank account. With school and everything I had a lot of bills to pay and I had to dip into the money I received for the car repair to make ends meet. Now the money is gone and the car isn’t repaired. I don’t want to get in trouble for spending the insurance check and not fixing my car, but I didn’t have much choice. Things were really tight. I wondered how long I have before the insurance company gets upset with me and demands I pay them back or get the car fixed? Eventually I should be able to put the money back, but it will be three or four months down the road. Is that too long?
Brian
Pittsburgh, PA
David Williams writes:
Good news, Brian! The money is yours and you can spend it on anything you want! Best of all, you can’t get into any legal trouble for not having auto repair work done the insurance company paid for.
You also shouldn’t worry about the auto insurance company demanding to be paid back, either. The money was paid to you on behalf of their policyholder (the person who caused your damage) in order that you might release him/her from the financial obligation that was created as a result of their negligence.
When you signed the release and accepted the insurance check, as far as the auto insurance company was concerned, it was a done deal. The release assures them that you are satisfied with the amount they paid, and you won’t be suing. That was all they likely cared about anyway.
The only time a person may incur an obligation to repair damage to a car after an auto accident is when they owe money and the car is being used to secure the loan. In cases such as these, borrowers usually sign a loan agreement with the bank or lending institution promising to keep the collateral in good condition. If they renege on their promise by failing to repair accident damage to their auto, the lender can often demand immediate payback of money that remains outstanding on the loan.
My biggest concern for you, Brian, is that you are not driving around in an unsafe car. Take the time and spend the money to have an auto inspection performed by a reputable mechanic or body shop. If there is nothing seriously wrong, drive the car and don’t worry. If problems are found, at least repair the accident damage to the point that the car is legally operable and, most of all, safe to drive. After all, even something as simple as a lamp not burning could get you ticketed. Worse yet, unsafe conditions could cause you to have another accident. This time, one that’s YOUR fault!
Thanks for posting a really good question!