Types of Claims
You receive checks from insurance companies for a variety of different types of claims. If you've had a house fire or other homeowner's loss, companies pay you the check, particularly if you required the services of several different types of contractors, or they make the check out to you and the contractor. If you still owe money on the house or vehicle damaged the insurance company normally makes the check to you and your lending company. Most of the time checks from health insurance go directly to the provider so you seldom receive a check unless you already paid the bill.
Checks Made to You
Companies frequently make the check to the individual holding the policy and expect them to deposit it into a checking account and then pay the bill. If the company makes the check to you, there is no law against depositing it and spending it elsewhere. However, there are other ramifications to doing that.
Check to Both of You
Unless a bank teller makes an error accepting the check for deposit, you won't be able to put the money in your account unless both parties sign the check. If you do forge the signature of the service provider, you breach the law, since it is forgery. The bank also may question the deposit if it has both signatures since very few providers will sign the back of the check and give it back to you because of fear of not receiving payment.
If the check was in your name and you use it for other purposes, you won't go to jail. However, there are other ramifications when you do that. The provider still requires payment, just as you expect payment when you go to work. When they don't receive it, they can sue you for a bad debt. Once they win the suit, they can put a lien on property, garnish wages or attach a bank account to recover the money you owe them.
No Work, No Problem
If you choose not to have a repair done and simply drive the car with a wrinkled door or bent fender, spending the money on other items instead, it's not a problem as long as you don't owe on it. The value of the car drops if it has damages. The insurance company doesn't suffer a loss because of the drop in value; you do. In reality, all the company is doing is reimbursing you for the drop in value due to a loss.