Beginning July 1, 2025, North Carolina implemented significant changes to auto insurance requirements. These updates increased minimum policy limits, made uninsured and underinsured motorist coverage mandatory, and eliminated the liability setoff rule that once reduced recoveries under UIM claims. For many crash victims, these reforms mean more protection and higher potential recovery after a wreck.
Underinsured motorist coverage pays for injuries and losses when the at-fault driver’s liability coverage is not enough to compensate you. UIM coverage can help pay for:
Under the old law, UIM was optional. Drivers could decline this coverage and, if purchased, recoveries were reduced by the amount paid by the at-fault driver’s insurer. For example, if the negligent driver’s policy paid $30,000 and your own UIM policy limit was $50,000, your insurer owed nothing because of the setoff.
Under the 2025 law, that limitation is gone. UIM coverage now applies in full after the at-fault driver’s liability coverage is exhausted. If your damages total $100,000 and the negligent driver’s policy covers only $50,000, your UIM coverage can provide the remaining $50,000.
This reform allows UIM protection to function as intended by filling the gap between what the negligent driver’s policy pays and your total losses.
Uninsured motorist coverage applies when the at-fault driver has no valid insurance or operates a vehicle not covered under any policy. UM coverage steps in to pay for damages that would otherwise go unpaid, such as:
Common uninsured motorist situations include:
Driving without insurance in North Carolina remains a Class 1 misdemeanor, carrying possible penalties of up to 120 days in the custody of the North Carolina Department of Adult Correction depending on prior record level.
With UM coverage now required by law, policyholders no longer face the risk of being left unprotected if the at-fault driver carries no insurance at all.
Frequently Asked QuestionsUnderinsured motorist (UIM) coverage fills the gap when the at-fault driver’s policy can’t cover your losses. As of July 1, 2025, every new and renewed policy in North Carolina includes mandatory UIM protection that matches your liability limits. It allows you to recover from your own insurer once the at-fault driver’s coverage is exhausted.
When damages exceed the at-fault driver’s liability limits, your UIM coverage applies. The 2025 law eliminated the setoff rule that previously reduced your UIM payment by the amount recovered from the other driver’s insurer, allowing you to collect both.
The 2025 reforms increased minimum coverage limits to 50/100/50, made UM and UIM coverage mandatory, and ended the liability setoff. These changes mean more compensation opportunities for injured drivers and passengers under North Carolina-issued policies.
Underinsured motorist coverage pays when the at-fault driver’s insurance isn’t enough to cover your total damages. You must first exhaust the negligent driver’s policy, then claim under your own UIM policy for the remainder up to your limits.
All auto policies issued or renewed in North Carolina on or after July 1, 2025 must include both uninsured and underinsured motorist protection. Before that date, drivers could reject this coverage, but the option to decline has been removed.
The 2025 law abolished the liability setoff that once allowed insurers to subtract what you collected from the at-fault driver’s policy. You can now recover the full amount available under both the negligent driver’s coverage and your own UIM policy.
The minimums increased from 30/60/25 to 50/100/50. That means at least $50,000 per person, $100,000 per accident for bodily injury, and $50,000 for property damage on every new and renewed NC-issued policy. Older policies remain under the previous limits until renewal.
The governing law depends on when the policy was issued or renewed. If your policy renewed before July 1, 2025, the old limits and rules apply. Accidents under policies issued or renewed after that date follow the 2025 reforms.
The 2025 reforms removed the rule requiring formal service on UM or UIM carriers within the statute of limitations. As long as your lawsuit is filed on time and your summons preserved correctly, you can serve your carrier later under standard procedure.
The expanded coverage and procedural updates create more complex insurance interactions. A North Carolina accident lawyer can identify which laws apply, calculate combined recoveries, and help ensure compliance with the new UIM and service requirements.
Courts analyze UIM coverage by first determining whether it applies and, if so, how much the insurer must pay. The process generally includes:
Under the previous system, courts applied the “setoff rule,” which reduced your UIM recovery by the amount paid from the at-fault driver’s policy. That rule frequently limited recovery to one policy’s value rather than both.
The 2025 law eliminates the setoff and redefines when a driver is considered underinsured. Instead of comparing policy limits, the new standard focuses on whether the at-fault driver’s insurance is insufficient to compensate you for the total damages.
This change prioritizes fairness and shifts the focus from technical comparisons to whether the injured party has been fully compensated for their loss.
The 2025 reforms brought the most significant improvements to North Carolina’s auto insurance laws in decades. Here’s what changed:
These changes collectively strengthen the ability of injured drivers and passengers to recover meaningful compensation from all applicable policies.
Examples of UIM Coverage Under Old and New LawsExample One (Pre-2025 Law):
A driver causes a crash resulting in $100,000 in injuries. Their policy covers $30,000 per person, and your UIM coverage provides $50,000. Under the old setoff rule, your UIM insurer could subtract the $30,000 already paid, leaving you only $20,000 in recovery from your own policy. Your total recovery would be capped at $50,000, even though your losses were double that amount.
Example Two (Post-2025 Law):
A negligent driver carries $50,000 in liability coverage, and your own UIM policy provides $50,000 in additional protection. Under the new law, once the negligent driver’s insurer pays its $50,000 limit, your UIM policy can contribute the remaining $50,000, allowing full recovery of $100,000 in damages.
This change removes the unfair advantage insurers once held and ensures that policyholders who paid for coverage can use it when it’s needed most.
Related Legal Issues and Next StepsIf you were injured in a wreck caused by another driver, you may be entitled to compensation through multiple layers of insurance. Understanding which laws apply to your case can directly affect your recovery.
The attorneys at Dodge Jones Injury Law Firm represent clients in car, motorcycle, and trucking accident cases throughout eastern North Carolina. The firm focuses on helping victims of negligence obtain fair compensation for medical expenses, lost wages, and permanent injuries.
Consultations are free, and cases are handled on a contingent-fee basis, meaning legal fees are earned only if compensation is successfully recovered.
To speak with an attorney about how the new North Carolina insurance laws may affect your case, call 877-622-6671 or reach out through the Dodge Jones Injury Law Firm website to schedule a confidential consultation.