North Carolina’s New Auto Insurance Law:
Increased State Minimums
What You Need to Know Before July 1, 2025
This is the first of two blog posts regarding the significant changes to the North Carolina Auto Insurance Industry that go into effect on July 1, 2025. Starting July 1, North Carolina will implement significant changes to its auto insurance laws, marking the first update to minimum liability coverage limits since 1999. These changes are mandated by Senate Bill 452, which was approved in 2023. Although the bill initially set an effective date of January 1, 2025, it was later amended to take effect on July 1, 2025, to provide insurers and policyholders ample time to adjust.
What’s Changing?
Under the new legislation, the minimum required auto liability insurance limits in North Carolina will increase as follows:
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Bodily Injury Liability:
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Per Person: $30,000 → $50,000
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Per Accident: $60,000 → $100,000
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Property Damage Liability:
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Per Accident: $25,000 → $50,000
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Why the Increase?
The previous minimum liability limits, established over two decades ago, have not kept pace with inflation and the rising costs of healthcare and vehicle repairs. By increasing these limits, the state aims to:
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Ensure that accident victims receive sufficient compensation for medical expenses and property damage.
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Reduce the financial burden on at-fault drivers who might otherwise face out-of-pocket expenses exceeding their insurance coverage.
Impact on Insurance Premiums
While the increased coverage limits offer better protection, they will inevitably lead to higher insurance premiums. Your auto insurance premium is based not only on your own driving habits and history, but also the claims experience of your carrier and the claims experience of the industry as a whole. When minimum limits are increased, insurance companies will pay out more in claims which results in an increased cost of doing business, and therefore higher premiums to offset those costs.
Uninsured and Underinsured Motorist Coverage Enhancements
The second major change included in this law is that significantly alters uninsured and underinsured motorist (UM/UIM) coverage:
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Elimination of the “Liability offset”: Previously, if an at-fault driver’s liability coverage paid out, that amount would be deducted from the victim’s Under Insured Motorist (UIM) coverage. Under the new law, victims can now access the full amount of their UIM coverage in addition to any liability payout, providing greater financial support in serious accidents.
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Breaking down what this means: Let’s imagine that you and I were involved in an auto accident that was my fault. In this scenario I have minimum limit liability coverage, which is currently $30,000 per person, $60,000 total per accident, and $25,000 in property damage, and you have $50,000 per person, $100,000 per accident, and $50,000 in property damage limit with the same limits on your Uninsured/Underinsured Motorist coverage. Let’s further imagine that you were seriously injured and ended up with medical bills of $75,000.
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Under the current law you, the injured party, would be eligible to collect $30,000 (I have a $30,000 per person liability limit on my policy in this scenario) from my carrier for your injuries. You would then be eligible to collect additional funds of $20,000 from your carrier under your Underinsured Motorist coverage (UIM). The reason that you can only collect $20,000 is that under current law your carrier takes a credit for the amount paid out by the liability carrier ($30,000) and then pays the difference. In this scenario you have a $50,000 per person limit on your UIM coverage, so $50,000 is available from your carrier minus $30,000 paid by my carrier equals $20,000 paid by your carrier.
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How that changes under the new law: under the new law the liability offset has been eliminated and you now have access to the full amount of Underinsured Motorist coverage. Going back to our scenario above, as of 07/01/2025 I will have to carry liability limits of $50,000 per person, $100,000 per accident, and $50,000 in property damage. For your medical bills totaling $75,000 you would now have the ability to recover $50,000 under my liability as the at-fault driver, and $25,000 under your own UIM coverage.
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What Should Drivers Do?
With these impending changes, it’s crucial for North Carolina drivers to:
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Review Current Policies: Ensure that your auto insurance policy meets or exceeds the new minimum requirements. Be aware that if you currently carry state-minimum liability, your coverage will be automatically increased to $50/$100/$50 at your first renewal following July 1st, 2025.
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Consider Higher Coverage Limits: Given the rising costs associated with accidents, higher coverage limits can offer additional peace of mind and financial protection.
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Consult with a Trusted Advisor at Overbay Insurance: Speak with one of the agents at Overbay Insurance Services to understand how these changes may affect your premiums and to explore coverage options that best suit your needs.
Final Thoughts
The upcoming changes to North Carolina’s auto insurance laws represent a significant shift aimed at enhancing financial protection for all road users. By understanding and adapting to these new requirements, drivers can ensure compliance with the law while safeguarding themselves against potential financial hardships resulting from accidents.
For personalized guidance and to review your current auto insurance policy, contact Overbay Insurance today. Our experienced agents are here to help you navigate these changes and find the coverage that’s right for you!
