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When you’re involved in a collision and you make an insurance claim for damage to your vehicle, you may be wondering if you have to go through with the repairs or if you can pocket a payout from your insurance company instead. The answer to this question depends on several factors, including the type of damage that was done, whether or not you own your vehicle, and whether or not you want to keep the optional physical damage coverages on your insurance policy.

The first thing you should know is that your insurer always has the right to choose to repair or replace your vehicle rather than handing you a cheque for the damage — this is fairly standard across the country. This doesn’t mean your insurer will never give you a cash payout and allow you to leave your vehicle as-is, but it means the decision is ultimately theirs. Here are a few questions that your insurer has to consider when you ask for a cash payout for damage to your vehicle.

Could the damage have an impact on the safety of your vehicle?

If a safety-related part of your vehicle (like one of your lights, tires, or seatbelts, for example) is damaged in a collision, you risk being pulled over and possibly getting a ticket if you don’t have it repaired. But it’s not just the obvious safety features that need attention after a collision; most new vehicles have advanced driver assistance features that can be compromised with even a small ding. Many of these systems, like automatic parking and blind spot monitoring, involve complex systems of sensors that will need to be tested and recalibrated to ensure they’re working properly after a collision. If the damage done to your vehicle may have compromised its safety, your insurance company likely won’t allow you to cash out.

Are you leasing or financing your vehicle?

If you’re leasing or financing your vehicle, you’re responsible for keeping it in good condition, so you will likely need to have your vehicle repaired if it is damaged in a collision. The lessor or lienholder may also be listed on your policy as a loss payee. If this is the case, your insurance company will have to include them in the payout when you make an insurance claim and don’t repair your vehicle, so you won’t be able to take a cash-out and skip the repairs without their signoff.

Do you want to keep your physical damage coverages?

If you choose not to repair your vehicle after it has been damaged in a collision, your insurance company may remove any optional physical damage coverages from your policy. Without these coverages, you could be on your own if your vehicle is further damaged down the road.

These are just a few of the factors that go into determining your eligibility for a cash payout following an insurance claim, and your insurer may deny your request or insist on repairs for another reason. Every car insurance claim is unique, and there are a lot of variables that go into determining the outcome of a claim. If you’re involved in a claim and have questions or need help weighing your options, speak to the representative working on your claim. If you have questions about your car insurance coverage, you can contact your licensed car insurance broker.


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