If you receive a payout from an insurance company to repair your vehicle, you aren't legally obligated to make the repairs if you own the car outright. If you financed the vehicle, however, the lender is the lienholder and has interest in the car. In that case, the insurance check may be made payable to both you and the lender, and the lender can require you to make the repairs.
Financed Vehicles
Even if an insurance check for a financed vehicle is payable solely to you, the lender still owns the car. Until the loan is paid off, the car is its asset and it want to protect its interests. Depending on your agreement, you may be required to to notify the lender of any damage and insurance payouts. The lender in turn could demand you make the repairs.
If your lender is listed on the insurance policy, the check often will be made out to both you and the lender for repairs. The check is sent to you to sign, then you send it to the lender, who endorses it and mails it back to you. Before signing off, the lender may want you to submit a copy of your repair receipt or photos of the repaired vehicle. If you cash the check without its consent or forge its signature, it's considered fraud.
Clear Titles
If you own the car outright, you aren't forced to repair the car even after receiving a check from your insurer. However, ignoring damage could lead to more extensive, costly repairs in the future. Any additional damage that results from delaying the repairs won't be covered by your insurance.
Repairing it Yourself
If the damage is minor, you may decide to fix it yourself to save money. Although you have the right to make your own repairs if the title is clear, you run the risk of not repairing it correctly. You won't be able to get additional funds if the repair isn't successful or requires additional work in the future.
Pre-Existing Damage
If you forgo the repairs, the damage will be classified as pre-existing damage when determining future coverage. If your car is hit in the same spot, the insurance company may not pay out again because you failed to have it repaired the first time. If your car is totaled, the existing damage is deducted from the car's value when calculating your payout.