My question is:
What should we do in this situation and with this money?
Should we accept the money from the insurance company? Is it permissible for us to give it in charity? Should the heirs take it?
If your brother is the one who insured the car, you should not take more than the amount he paid for the insurance and you should give the rest in charity, because insurance policies are a form of gambling and are a kind of ambiguous contract, which are not permitted by sharee’ah. (See question no. 8889).
We ask Allaah to give us sufficient of what is halaal so that we will have no need of what is haraam, and to make us independent by His Bounty. And Allaah is the Source of strength.