What Should I Do If Insurance Sends Me a Check?
Received an insurance check? Understand the implications and follow clear guidance to ensure you handle and apply the funds appropriately.
Receiving an insurance check signifies a key step in resolving a claim, whether for property damage, an automobile accident, or a health-related event. This payment represents your insurer’s fulfillment of its obligations under your policy. Understanding the nature of this check, verifying its details, and properly managing the funds are important steps for policyholders.
Understanding Your Insurance Check
Insurance checks cover expenses for various claims, such as auto body repairs, home reconstruction, medical bills, or personal injury settlements. The check’s purpose is typically outlined in accompanying documentation from the insurer.
The check itself contains several pieces of information, including the insurance company’s name, payee’s name(s), amount, check number, and often a claim or policy number. Payees can include a single individual, multiple individuals, or individuals alongside a third party like a mortgage lender or auto repair facility. For home repairs with an active mortgage, checks are commonly made out to both the homeowner and the mortgage lender. Auto insurance checks might list the policyholder, a repair shop, or both, especially if a lienholder is involved.
Verifying and Addressing Your Check Details
Before depositing any insurance check, verify its legitimacy and ensure the amount aligns with your claim settlement. To confirm authenticity, contact the insurance company directly using information from their official website or policy documents, rather than relying on check details. Genuine checks often incorporate security features like watermarks or specialized printing techniques. Validate the policy details and payment information against your records. You can also contact your state’s insurance department to verify the insurer’s standing.
Compare the check amount to your expected or agreed-upon settlement. If the amount is less than anticipated, contact your insurance company before depositing the check. If the check states “full and final settlement” and you disagree, you can accept it as a partial payment, but inform the insurer in writing that you expect further resolution. Insurers often issue an initial payment, with additional checks following as damages are assessed.
When a check lists multiple payees, all named parties must endorse it. Banks may require all payees to be present with valid identification, especially for larger amounts, due to fraud prevention. If a mortgage lender is a co-payee on a home damage claim check, they might hold funds in an escrow account, releasing them incrementally as repair work progresses. For vehicles with outstanding loans or leases, the lienholder is typically included as a payee, ensuring funds are used for intended repairs as per your financing agreement.
Depositing Your Insurance Check
After verifying the check details, endorse and deposit it. Proper endorsement requires signing the back of the check exactly as your name appears on the front. For added security, write “for deposit only” and your account number beneath your signature.
Checks can be deposited in-person at a bank or credit union, via an ATM, or using mobile deposit. Most checks typically clear within two business days. Financial institutions are generally required to make the first $200 to $225 of a deposited check available by the next business day.
Larger deposits or checks into newer accounts may be subject to extended holds, sometimes up to seven business days or more. Banks have daily cut-off times for deposits; any deposit made after this time will be processed on the next business day. While clearing can take two to five business days, the overall settlement process may take an average of six days.
Managing Funds After Deposit
Once funds are available, their management depends on the claim type. For auto accident claims, funds are primarily for vehicle repairs. If you own your vehicle outright, you might have flexibility, but review your policy terms. If your vehicle is financed or leased, the lienholder’s name will typically be on the check, meaning funds are designated for repairs, and both you and the lienholder must endorse it. Keep all repair receipts and documentation for your records.
For home damage claims, funds are meant for repairing or rebuilding your property. If your home has a mortgage, the check will likely be made out to both you and your mortgage lender. Mortgage lenders often place these funds into an escrow account, releasing them in stages as repair work is completed and inspected. Maintain detailed records of all expenses, including receipts and correspondence with your insurer and contractors. Some policyholders open a separate bank account for insurance claim transactions to simplify tracking.
For health claims, insurers frequently pay medical providers directly. If you receive a check, it is typically a reimbursement for out-of-pocket expenses you incurred. Ensure all medical bills are settled and document all payments.
For personal injury settlements, especially larger sums, consider consulting a qualified financial advisor for guidance on managing funds effectively, considering your long-term financial goals. Regardless of claim type, maintain comprehensive records of all funds received and spent. Keep all relevant claim documents until the claim is officially closed and all payments received. For tax purposes, retain records for three to seven years, especially if they pertain to business assets.