Auto Insurance Requirements in North Carolina

Auto Insurance Requirements in North Carolina

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Before hitting the road in North Carolina, all drivers must carry a car insurance policy that includes at least the state-mandated coverage limits, along with proof of coverage. Drivers who cause car accidents must pay for any damage that results. While car insurance is the most common form of coverage, you may instead choose an alternative type of financial responsibility. Here's what to know about coverage in North Carolina.

Type of coverage

Minimum limits in North Carolina

Bodily injury (BI)

$30,000 per person/$60,000 per accident

Property damage (PD)

$25,000 per accident

Uninsured motorist property damage (UMPD)

$25,000 per accident

Uninsured motorist bodily injury (UM/UIMBI)

$30,000 per person/$60,000 per accident
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North Carolina car insurance minimum requirements

A minimum North Carolina car insurance policy includes uninsured motorist coverage, which protects you and your passengers after an accident, and liability insurance, which protects anyone else who's impacted. Every car insurance policy must include the following basic coverages, each with minimum limits:

Bodily injury (BI) pays someone else's medical bills that arise from an accident, up to $30,000 per person and $60,000 per accident. You might be able to increase your limits, depending on the insurer.

Property damage coverage (PD) pays for property damage that results from an accident you cause, up to $25,000 per accident. Higher limits are usually available depending on the insurer.

Uninsured motorist coverage (UM) pays for your own bills when you're hit by an uninsured driver.

There are two components to UM: bodily injury (UMBI) and property damage (UMPD), which have the same minimum limits as regular liability insurance. If you choose to increase your limits, you'll need to get a combined UMBI and underinsured motorist BI coverage.

Uninsured motorist property damage (UMPD) pays for damage to your own car, up to $25,000, if you're hit by an uninsured driver. You may purchase higher limits up to $1 million, but they may never be higher than your regular PD limits. If you're covered by multiple auto insurance policies, North Carolina allows your total amount of coverage to be the sum of every policy's UMPD limits.

Uninsured motorist bodily injury (UMBI) is required when you are only purchasing the minimum bodily injury liability limits (30/60), and it covers your medical bills following an accident caused by an uninsured motorist.

(UM/UIMBI) is required when you have BI limits higher than the state minimum and decide to raise your UMBI limits to match it. The underinsured motorist coverage kicks in when you have exhausted the other driver's BI limits in these scenarios:

  • The at-fault driver's BI limits are lower than your UM/UIMBI limits.
  • The total medical payments you receive from the other driver's BI policy are less than your UM/UIMBI limits.
  • The at-fault driver's BI limits are lower than your total combined UM/UIMBI limits of different policies.

Optional car insurance coverage in North Carolina

A minimum insurance policy in North Carolina pays what's due to the other driver and shields some of your assets when you cause the accident. However, the minimum coverage in North Carolina does little when it comes to your own medical care. You may be left with a sizable bill for your own injuries and repairs. Here are three optional coverages that pay for your expenses:

Collision pays for damage to your car that results from a collision, whether you've hit another car or run into a street lamp. The limit of your coverage is based on the market cash value of your insured vehicle. You'll need to pay a deductible, ranging from $50 to $2,000, before your insurer picks up the bill.

Comprehensive is sometimes called "other-than-collision coverage" because it pays for your car's repairs after it's vandalized, stolen or impacted by an "act of God." Comprehensive coverage comes with a deductible, which will be reflected in your coverage premiums.

Medical payments coverage pays for all necessary medical expenses following an accident — for you and your passengers. If the policyholder dies in the accident, MedPay will also cover funeral expenses. Depending on the insurer, your coverage limits might range from $500 to $10,000. Motorists with health insurance may find this type of coverage redundant, but take a look at your policy. Most health insurance plans won't cover funeral costs and some won't cover injuries resulting from car accidents.

Alternative proof of financial responsibility in North Carolina

North Carolina's Vehicle Financial Responsibility Act of 1957 requires all drivers to carry some form of liability insurance as proof of financial responsibility. An insurance policy is the easiest way to satisfy the requirements, but you have alternative options:

Surety bond: Once you buy a surety bond worth at least $85,000 from a licensed North Carolina surety company, you'll get a certificate of compliance from the state insurance commissioner. The bond guarantees you'll pay for any expenses following an accident if there's a judgement against you, much like an insurance company would under a minimum-liability policy. If you can't fulfill this promise, the surety company will pay in your place and collect from you later.

Real estate bond: This type of bond guarantees you'll pay up to $85,000 following any car accident you cause. It's backed by a piece of property and must be approved by a county superior court clerk. The bond must be signed by two other individuals who own real estate in North Carolina with combined equity worth at least $170,000. If you fail to make the necessary payments, the Commissioner will take the property to make good on your liability.

Cash/security deposit: You may choose to make an $85,000 deposit using cash or another type of security such as a government bond or note. If you're involved in an accident, the commissioner will take your deposit and satisfy any judgement that results.

Self insurance: If you own or lease at least 26 cars, you may apply with the commissioner to become a self insurer. The commissioner will ask for documents that prove your financial standing — such as income statement and/or financial statement — and will issue a certificate. If any of your cars are involved in an accident, you'll need to pay for the damage using your own funds.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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