Insurance Check Cashing Laws

Check-cashing fees vary from state to state. However, in most states, check-cashing stores are allowed to charge a higher fee for cashing a check from insurance than for cashing other types of checks. For example, in Michigan, check-cashing outfits may charge up to 7 percent of the face value of the check if you cash an insurance check, while they may only charge up to 5 percent of the check's value if you cash a payroll check.

If your insurance company gives you a check for covered repairs, state law may prevent you from getting the money for several days. If you have a mortgage, your lender may have to endorse the check before you can cash it because the home belongs to him until you completely pay off your mortgage. State laws usually leave it up to your lender and your bank to work this out; many lenders require such a policy to make sure that the benefits are used to repair the home.

If you own the property you have insured outright -- that is, if you do not have any outstanding loans on it -- then you are not obligated to use insurance benefits to repair the property. If you wish, you can cash the check and use it for other purposes; once the insurance company issues it to you, what you do with it is your business. However, you should consider whether you can safely use your vehicle or home without repairing it.

If you receive a large insurance settlement, cash it at a bank instead of a check-cashing facility. The process can take longer but is ultimately more safe than carrying around large sums of money. In addition, if you don't own the insured property outright, you won't be able to get the cash immediately since you have to get your lender's endorsement, and banks won't charge you a check-cashing fee so you will keep more of your money.