How Do I Cash My Insurance Check if It Is Written Out to Me & My Lien Holder?

Man driving car

Issuing insurance checks payable to both the policy holder and lien holder aids in combating fraud.

Photo Credit: urbazon/E+/GettyImages.

If you have an unpaid car loan and the lienholder refers to it as a two-party insurance check, then the car insurance company will certainly write a check for you against the car. It’s not uncommon for two separate entities to write a check for an auto insurance company to claim a check. Some rules apply, and disregarding them can result in legal and even financial penalties for cashing in on the check.

Who Has to Endorse the Check?

“In the line order, there should be a pivotal word between two names – “and” or “or.” However, the issue becomes further complicated when two-party checks can be written in one of two ways, as both names will appear on it.”

To endorse the check, both you and a representative of the lienholder must jointly present payment, along with government ID to verify your identities, depending on the check’s size, if the word “and” is included.

If the two names appear on that line without a qualifier, you can sign the check yourself and it is likely safe to do so if it says “or.” It is not explicitly stating that both parties need to sign, so only one of you needs to sign the check.

Who Gets the Money?

If it states “and” and you attempt to cash it, you likely won’t have much fortune. Presuming that both parties have endorsed it, the cheque can be deposited in either payee’s account irrespective of whether it states “and” or “or.”

You would likely have to apply for a loan to cover the remaining balance. You can ask the lender to provide an estimate of the repair costs and provide them with a copy of the repair estimate to check. In either case, you can reach out to your lienholder to obtain their signature on the check, as the check will need to be endorsed by them.

Instead, in the same manner as if you had sent the payment to the lender, that amount should be allocated to your loan and the shop will forward any remaining funds to your lienholder. Alternatively, if the check includes the word “and,” you can request it to be made out to the auto repair shop or return it to the insurance company.

Another option is that the auto repair shop may still accept the check with just one signature because they are legally obligated to send any unused funds back to the insurance company, as there could be legal ramifications if the check is misused or misplaced.

Two-Party Insurance Checks

Ensure that both you and the payees have a financial stake in the vehicle, as the company has a legal obligation to include both of you. However, if the vehicle has not been paid off yet and you took out a loan, a lien will be placed on the vehicle, allowing the lender to repossess it if you fail to make payments or sell it. The insurance check will be made out to the bank that financed the car and you. Do not blame your insurance company for putting the lender’s name on the policy.

If You Don’t Want the Repairs

If your vehicle is not totaled, you may be able to sign a check and send it to your lienholder to fix the car. However, you should keep in mind that driving around with dings, dents, or crushed fenders may be an issue if the entirety of your loan is applied to the balance.

If your car is a total loss, the odds of success are better with this option, as it will probably restore the asset to a decent and sellable condition that the lender wants.