North Carolina Auto Insurance Law Changes Explained
North Carolina Auto Insurance Law Changes Explained

Each state has its own specific set of auto insurance laws that set certain requirements for its residents.

In 2023, North Carolina passed landmark legislative changes to the state’s auto insurance laws, increasing minimum limits on liability insurance policies for the first time in nearly 25 years and eliminating the cap on underinsured motorist (UIM) policies.

The legislative changes will go into effect for auto insurance policies and renewals issued on or after January 1, 2025. Fortunately, these changes will increase the potential recovery for North Carolinians injured in auto accidents. This article provides insight into these legislative changes and details how they help North Carolinians.

Changes in car insurance “Civil Liability”.

North Carolina requires drivers to carry Liability auto insurance. Liability insurance pays for a car accident victim’s injuries, including medical care, lost wages, pain and suffering, scarring and disfigurement, and property damage. In a car accident, the at-fault party is responsible for all injuries and damages caused by the crash, but the at-fault driver’s liability insurance steps in to cover the injuries and damages (up to the insurance policy limits).

Since 1999, minimum liability insurance limits in North Carolina have remained the same. These minimum limits are commonly referred to as “30/60/25” because the law requires liability policies to provide limits of $30,000 per person injured in an automobile accident, $60,000 per accident, and $25,000 for property damage. This means that if one person is injured in an accident, assuming the at-fault driver’s policy includes the minimum limits, the at-fault driver’s insurance will cover up to $30,000 for the victim’s injuries. If more than one person is injured, the policy will cover a total of up to $60,000 for all injured persons. While these numbers may sound high, hospitalization after an accident can easily exceed $30,000. Similarly, the value of many vehicles exceeds $25,000. Therefore, having low minimum limits can result in the available insurance money not covering the full amount of damages.

On October 3, 2023, Senate Bill 452 became law. This new law significantly increases the required minimum margins from 30/60/25 to 50/100/50. In other words, for policies and renewals issued on or after January 1, 2025, liability policies must provide limits of $50,000 per person injured in an accident, $100,000 per accident (an increase of $40,000 from the previous minimum limits) and $50,000 for property damage (double the previous minimum limit). Note that 30/60/25 remains the required minimum limits for policies and renewals issued before 1 January 2025.

Currently, only Alaska, Maine, and Michigan have minimum limits of 50/100. No state has a minimum over $25,000 for property damage. Therefore, North Carolina’s new minimum limits place the state in a group of a select few states that protect their drivers and passengers with higher minimum limits.

Changes to coverage for underinsured motorists

UIM insurance is the insurance you buy to protect yourself when an at-fault driver does not have enough liability insurance to compensate you for your injuries and damages from an accident. In other words, UIM policies cover the gap left between the at-fault party’s liability insurance and the injured party’s damages. This coverage is especially useful because it can serve as protection for the victim when the at-fault driver does not have enough insurance to cover the damages caused by the accident. While UIM coverage is not mandatory for drivers, many North Carolinians purchase it.

The new law significantly changes the benefits of UIM policies. Prior to Senate Bill 452, an insurer providing UIM coverage could deduct the amount the at-fault driver’s liability insurance paid to the injured party. For example, imagine that Amy causes a car accident, injuring Bob. Amy carries $50,000/person in liability coverage. Bob carries a $250,000 UIM policy and sustained severe injuries. Prior to the enactment of Senate Bill 452 (and under current North Carolina law), the most Bob could recover was $250,000: $50,000 from Amy’s liability policy and $200,000 from his UIM policy.

However, for UIM policies issued on and after January 1, 2025, the insured may collect the entire value from their UIM policy after the at-fault driver’s liability policy has been exhausted. But a UIM insurer does not automatically pay out the full policy to its insured; rather, the UIM carrier will consider all damages (including past, present, and future medical bills; lost wages; reduced earning capacity; past, present, and future pain and suffering; and permanency and scarring) to determine the amount it considers its insured is entitled to receive. Using the same example above, beginning in 2025, Bob can recover up to $300,000 (instead of $250,000): $50,000 from Amy’s liability policy and $250,000 from his UIM policy. This change in UIM coverage makes a real difference for injured North Carolinians who choose to carry the coverage.

Conclusion

These changes are monumental for the landscape of North Carolina auto insurance laws, making it possible for accident victims to recover far more compensation when they are seriously injured. Hiring a North Carolina car accident attorney can help you deal with the aftermath of a car accident, including the complex nature of insurance.

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