In 2023, North Carolina passed notable legislative changes to the state’s car insurance laws, increasing the minimum limits on liability insurance policies for the first time in nearly 25 years and removing the setoff for underinsured motorist (UIM) policies.
The legislative changes will take effect for car insurance policies and renewals issued on or following January 1, 2025. Luckily, these changes will increase the potential recovery for North Carolinians injured in car wrecks. This article provides insight into these legislative changes and details how they help North Carolinians.
North Carolina requires its drivers to carry liability car 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 party at fault is responsible for all injuries and damages the wreck causes, but the at-fault driver’s liability insurance steps in to cover the injuries and damages (up to the insurance policy’s limits).
Since 1999, North Carolina’s minimum limits for liability insurance have remained the same. These minimum limits are commonly referred to as “30/60/25” because the law requires that liability policies provide limits of $30,000 per person injured in a car wreck, $60,000 per wreck, and $25,000 for property damage. This means that if one person is injured in a wreck, assuming the at-fault driver’s policy carries 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 up to $60,000 total for all of the injured individuals. While these numbers may sound high, hospitalization following a wreck can easily exceed $30,000. Likewise, the value of many vehicles exceeds $25,000. Therefore, having low minimum limits could 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 substantially increases the required minimum limits 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 a car wreck, $100,000 per wreck (a $40,000 increase from the previous minimum limits), and $50,000 for property damage (doubling the previous minimum limit). Note that 30/60/25 remains the required minimum limits on policies and renewals issued before January 1, 2025.
Currently, only Alaska, Maine, and Michigan have minimum limits of 50/100. No state has a minimum above $25,000 for property damage. Therefore, North Carolina’s new minimum limits place the state into a group of a select few states that protect their drivers and passengers with higher minimum limits.
UIM insurance is the insurance that you purchase to protect yourself when an at-fault driver does not have enough liability insurance to compensate you for your injuries and damages from a wreck. 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 helpful 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 wreck. While UIM coverage is optional for drivers, many North Carolinians purchase it.
The new law significantly changes the benefits of UIM policies. Before Senate Bill 452, an insurer providing UIM coverage could subtract the amount that the at-fault driver’s liability insurance pays to the injured party. For example, imagine Amy caused a car accident, injuring Bob. Amy carries $50,000/person in liability coverage. Bob carries a $250,000 UIM policy and suffered extensive injuries. Prior to Senate Bill 452’s enactment (and under current North Carolina law), the most Bob can recover is $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, an insured can collect the entire value of their UIM policy after exhausting the at-fault driver’s liability policy. But the UIM insurer does not automatically pay out the full policy to its insured; rather, the UIM carrier will look at all damages (including past, present, and future medical bills; lost wages; diminished earning capacity; past, present, and future pain and suffering; and permanency and scarring) to determine the amount which it believes its insured is entitled to receive. Using the same example above, starting in 2025, Bob could 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 to UIM coverage makes a real difference to injured North Carolinians who chose to carry the coverage.
These changes are monumental for the landscape of North Carolina’s automobile insurance laws, making it possible for accident victims to recover far more compensation when they are seriously injured. Hiring a North Carolina car accident lawyer can help you navigate the aftermath of a car accident, including the complex nature of insurance.
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This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.
