North Carolina Auto Insurance Law Updates Effective July 1, 2025

NCAJ’s Legislative Team worked hard during the legislative sessions of 2023 and 2024 to ensure the passage and adoption of laws that changed minimum liability insurance limits and UIM coverage mandates. Those laws go into effect July 1. NCAJ Government Affairs Consultant Chris Nichols provides a primer on how the laws will affect lawyers and their clients below.

Q: What are the new minimum liability insurance limits?

A: As of July 1, 2025, North Carolina is raising its legal minimum auto liability coverage to:

• Bodily injury: $50,000 per person / $100,000 per accident
• Property damage: $50,000 per accident

These replace the previous minimums of $30,000/$60,000 and $25,000 respectively 

Q: To which policies do these changes apply?

A: The higher limits apply only policies issued or renewed on or after July 1, 2025. Existing in-force policies that are not renewed by this date remain unchanged until renewal.

Q: What are the bills and session laws that make these changes?

A: Senate Bill 452 (2023) which became law as Session Law 2023-133 and Senate Bill 319 (2024) Session Law 2204-29.

Underinsured / Uninsured Motorist (UIM/UM) Coverage

Q: Is UIM coverage mandatory now?

A: Yes. Starting July 1, 2025, all new and renewed auto liability policies must include UM and UIM coverage, matching or exceeding the new liability limits, i.e., $50,000/$100,000/$50,000. In other words, every minimum limits policy will have at least $50,000 UM/UIM coverage.

Q: What is the “liability setoff,” and what has changed?

A: Under previous law, UIM benefits were reduced (“offset”) by the amount paid by the at-fault driver’s liability carrier. The new law eliminates this offset, so claimants can now collect the full UIM amount in addition to liability payouts.

Example: With a $100,000 settlement, under the new limits, the injured party can collect $50,000 from the at-fault driver’s liability policy plus $50,000 from their own $50,000 UIM coverage. Previously, the most that could be recovered would have been $50,000 liability. 

Q: Has the definition of underinsured changed?

A: Yes. Underinsurance is now determined by total damages rather than the at-fault driver’s policy limits. Insurers cannot reduce UIM payments via setoff, except for workers’ compensation.

Q: Does the new law change service of process on UM/UIM carriers?

A: Yes! Prior to the enactment of SL 2023‑133, UM and UIM carriers had to be formally served within the statute of limitations applicable to the tort claim. Failing to do so—even if the insurance company had actual notice—meant courts would dismiss the UM/UIM claim. This was established in cases like Brown, Thomas, and Davis v. Urquiza 

The statute now states insurers “may also be issued a summons, complaint, or other process as an unnamed party and served by registered or certified mail, return receipt requested, or any manner provided by law.” Crucially, it explicitly allows service outside the limitations period, so long as: the lawsuit was filed before the statute of limitations expired, and the summons was“properly issued, preserved, and served” following Rule 4, even if that occurs after the limitations period ends. Service may now occur later, mirroring the treatment of typical tort defendants. It is still always a good idea to file early and serve through the Department of Insurance.

Rating & Surcharges

Q: What’s new for inexperienced driver surcharges?

A: For drivers first licensed on or after July 1, 2025, the inexperienced operator surcharge extends from 3 years to 8 years. Surcharges for years 4 to 8 are lower and decrease progressively.

Q: How have safe-driver surcharges changed?

A: Violations worth 4 or more SDIP points (excluding certain excessive speeding) now trigger a 5-year premium surcharge, up from 3 years.

Q: What about minor speeding and PJCs?

A: Prior carve-outs for:

• Speeding ≤10 mph over limit, and
  
• Prayers for Judgment Continued (PJCs)

will now have a 5-year lookback (rather than 3) for determining insurance point and surcharge eligibility, applicable only to convictions occurring on or after July 1, 2025