Cash deal

A cash deal in insurance means the insurer pays a lump sum directly to the policyholder instead of repairing or replacing damaged property. Insurers offer cash deals for claims involving cars, homes, and electronics when repair costs are uncertain or disputed.

Policyholders accept cash deals to gain flexibility in choosing their own repair vendors or using funds differently. Insurance companies calculate cash deal amounts based on actual cash value (ACV) minus deductibles; for example, if ACV is $10,000 and deductible is $1,000, payout equals $9,000.

Cash deals may result in lower payouts than direct repairs because insurers factor depreciation into settlement offers. Major US auto insurers like State Farm and Allstate provide cash deal options after vehicle accidents if customers prefer not to use network shops.

Accepting a cash deal can end further claim rights for that incident according to standard policy terms. IRS rules state that insurance claim payments received as a result of a loss are generally not taxable income unless they exceed adjusted basis or relate to business property, as stated by the Insurance Information Database.

Some states require written disclosure before finalizing a cash deal so consumers understand potential out-of-pocket expenses compared with direct insurer-managed repairs.