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Types of Car Insurance Coverage & Coverage Limit Recommendations
Current Coverage Options in North Carolina
North Carolina’s legislature recently updated our Financial Responsibility Act to increase the minimum liability insurance coverage requirements. However, the increased limits do not take place until January 1, 2025. For this article, we present the current coverage options in North Carolina. If you come across this article after the new laws take effect, our recommendations remain relevant and wise for all motorists as we always encourage motorists to carry limits above the state minimums.
Here are the types of coverage that are available on a North Carolina car insurance policy and our recommendations for the amount of coverage you should carry:
PROPERTY DAMAGE LIABILITY
All policies come with property damage liability coverage, and our state’s minimum mandatory coverage is currently $25,000.00. If you cause an accident and damage a high-end automobile or SUV, you could easily exhaust this coverage. The $25,000.00 is the total amount to pay for towing from the collision scene, storage of the vehicle before repairs begin, the full cost of all repairs OR replacement of the vehicle if this is cheaper than the repair cost.
The average cost of a new car or SUV stands at $48,000 as of March 2023, according to Kelly Blue Book. Thus, $25,000.00 in total car damage coverage can leave you holding the bill if you cause a total loss to a relatively new vehicle. Also, the $25,000.00 coverage limit is a per-accident limit. Thus, if you cause a collision that damages multiple vehicles, you can be held liable to pay for all damages that exceed your coverage.
We recommend that you carry $100,000.00 in property damage liability coverage. This level of coverage would cover the vast majority of collision-related property damage claims and give you peace of mind and financial security.
BODILY INJURY LIABILITY
North Carolina only mandates $30,000.00 per person and $60,000 per occurrence in bodily injury liability coverage. This “split limit” approach to coverage allows a single crash victim to collect no more than $30,000.00, even if their injuries are severe and debilitating.
The per-occurrence limit of $60,000.00 limits all victims’ claims to this level of coverage. If you cause a three-vehicle collision and there are five victims with hospitalizations and surgeries, they must voluntarily agree to divide the $60,000.00 between all victims. If the group does not agree to share the low amount of insurance coverage, the at-fault driver faces extensive personal responsibility for the victims’ injury claims.
North Carolina law will change on January 1, 2025, with the minimum limits for bodily injury liability coverage moving up to $50,000.00 per person and $100,000.00 per occurrence. While this is a welcome and positive change, these limits remain too low for collisions that result in meaningful or lasting injuries. Our firm only handles serious injury claims arising from roadway collisions, and we frequently see medical bills for a single crash victim that exceed the current $30,000.00 per-person limit. Thus, it is truly unwise to carry the minimum mandatory coverage limits for bodily injury and property damage.
Fortunately, it is relatively inexpensive to opt for higher liability coverage limits. Under the current insurance rate structure in our state, most of the cost of a higher-limits auto policy is the premiums for the underlying minimum-limits policy. Thus, increasing liability limits typically costs just a small fraction of the premium on the minimum limits policy. For a tiny increase in monthly premiums, you can choose higher liability coverage limits and truly protect your home, bank accounts, investment accounts and other assets.
To safeguard your assets, we recommend that you carry at least $100,000.00 per person and $300,000.00 per occurrence of bodily injury liability coverage. There is a middle ground option of $50,000.00 per- person/$100,000.00 per occurrence, but the jump to the $100K/$300K costs only a little more, and the coverage you have will leave your insurance carrier responsible for all but the more severe collisions, and give you true financial security and peace of mind.
If you are a high net worth individual, you should move up to either $250,000.00 per person and $500,000.00 per occurrence, or $500,000.00 per person and $1,000,000.00 per occurrence. If you cause an accident resulting in severe injuries, attorneys for the crash victim typically perform an asset search and will see that you have wealth, real estate and assets that would satisfy a judgment that exceeds your coverage. This will motivate them to reject your coverage limits and come to you for additional cash payment. Choosing high-limits bodily injury liability coverage is a small investment to safeguard against personal legal liability arising from a catastrophic collision.
If you own a home, your homeowners insurance carrier will offer optional “umbrella” coverage, which is excess liability coverage that pays only if you cause a collision which results in injury claims that exhaust your auto insurance liability limits. Umbrella coverage is fairly inexpensive, and the coverage options are typically $1 million or more. Most homeowners insurance carriers require you to carry bodily injury liability limits of at least $250,000.00 per person, $500,000.00 per occurrence before they will issue an umbrella policy. We strongly recommend umbrella coverage.
COLLISION
Collision coverage pays for the cost of repair or replacement to your vehicle following a crash. Collision is optional coverage, meaning you can choose to carry it on your policy or leave your vehicle unprotected. Collision coverage is also no-fault coverage, so the coverage will pay for the repair or replacement of your car even if you did not cause the accident. The advantage to using collision coverage in an accident someone else caused is you do not have to cooperate with the at-fault driver’s insurance carrier.
If your vehicle is financed, the bank will require you to carry collision coverage. Otherwise, the choice is yours. The question at hand is whether you can afford to repair or replace your vehicle if an accident occurs that is partially your fault. In North Carolina, if a driver is just slightly at fault for causing an accident (even just 1% at fault), they cannot collect from other driver(s) who share blame for the crash. Thus, unless you are entirely innocent, collision coverage is the insurance you need to pay for repair or replacement of your vehicle.
If your car is paid off and you hold the title, you have to run the numbers on your vehicle to decide whether to carry collision coverage. Cars depreciate over time, especially with heavy use. However, some cars maintain their value better than others. The typical rule of thumb is that once a car falls into the 10-15 year age range, it is often best to pass on collision coverage and bank the premiums. If those funds are indeed set aside year after year, you may have sufficient funds to cover what a collision policy would pay for an older, lower-value car.
If you are typically check-to-check and don’t have credit or savings to fund a sudden need to repair or replace your vehicle, it is still wise to carry a collision on an older vehicle. Even if you only stand to collect a few thousand dollars, if you couldn’t otherwise access those funds to repair or replace your vehicle, the collision premium acts like a savings account for that specific need.
RENTAL REIMBURSEMENT COVERAGE
Collision coverage does not pay for a rental car following a collision. Thus, if you do not have an extra vehicle in your household and would need a car to drive while yours is being repaired, this inexpensive coverage is a wise investment.
MEDICAL PAYMENTS COVERAGE
We recommend that you always carry Medical Payments (Medpay) coverage on your personal auto policy. Medpay is an optional coverage that provides very helpful benefits for injury victims following a collision.
Mepay is available with limits options of $500.00, $1,000.00, $2,000.00, $5,000.00, $10,000.00, $25,000.00, $50,000.00 and $100,000.00. The larger policies are rare. Most people carry either $1,000.00 or $2,000.00, and many drivers carry no Medpay on their policies.
We strongly recommend carrying at least $5,000.00 in Medpay coverage. Medpay is a portable health insurance policy that pays for crash-related medical bills after a collision. The limit is for every person in the covered auto. If a driver has two passengers, all three occupants have the right to present medical bills and claim up to $5,000.00 in benefits.
Medpay coverage has two unique advantages over traditional health insurance coverage. First, Medpay typically pays the full medical bill directly to the healthcare provider with no adjustments or write-offs. If the victim has already paid the bill, Medpay will fully reimburse the victim. Either way, the bill is promptly paid in full. Second, unlike most personal health insurance coverage, the Medpay insurer does not have a right of reimbursement if you are an innocent victim and pursue a personal injury claim against the at-fault driver. Traditional health insurance typically does force you to pay them back from your injury claim proceeds. However, if you have Medpay that pays your medical bills, you can collect for the same medical bills through your personal injury case against the at-fault driver. It’s a legal opportunity to be paid twice for your medical bills.
Even if you have traditional health insurance coverage, you should still carry Medpay on your auto policy. Medpay pays benefits even if health insurance has already paid the bill. Also, Medpay helps to cover co-pays or medical costs that are patient-pay portions that must be paid if the health insurance annual deductible is not yet met.
Medpay is very inexpensive coverage and is always beneficial. If you can afford the slight increase in monthly premiums, always purchase Medpay and we recommend coverage limits of $5,000.00 or more.
UNINSURED MOTORIST COVERAGE
UM coverage is the coverage you choose for yourself, your passengers and your family in the event that you are injured in a hit-and-run collision, or in a collision caused by a driver who failed to carry car insurance. Uninsured Motorist (UM) coverage covers the policy-holder, all occupants of the insured vehicle and all family members who reside with the named insured. This expansive coverage is mandatory in North Carolina with the current minimum limits:
- Uninsured Motorist Property Damage – $25,000.00
- Uninsured Motorist Bodily Injury – $30,000.00 per-person/$60,000.00 per- accident
For higher limits, the coverage is optional and tracks the same limits options as liability coverage.
In a hit & run accident, there is no UM property damage coverage. Thus, you must have collision coverage to collect payment for your damaged vehicle. However, there is UM bodily injury coverage for all occupants of the insured vehicle who are injured by a hit & run driver. If the crash is caused by an uninsured driver who is identified, the damaged vehicle is covered by Uninsured Motorist property damage coverage with a reduced deductible of $100.00, even if you chose not to carry Collision coverage on your policy.
We strongly recommend that you carry at least $100,000.00 per person and $300,000.00 per accident in UM bodily injury coverage. Ideally, carry even more. If you carry the $100,000.00 per person limit, you would be able to collect up to that amount for your personal injury claims if you are injured by an uninsured driver or a hit & run driver.
UM coverage is also stackable in North Carolina. If you are hit and injured by an uninsured driver, the UM coverage on the vehicle you were riding in is primary. If your injury claims are worth more than the coverage on that vehicle, you can also collect UM benefits from all of your own personal auto policies (some folks have vehicles insured under separate policies – i.e. a motorcycle policy or an RV policy) AND from all other auto insurance policies for resident relatives – people who lived with you on the crash date who are related to you by blood or marriage. We frequently collect from multiple UM policies for one injured client.
UNDERINSURED MOTORIST COVERAGE
Underinsured Motorist (UIM) coverage pays additional benefits to crash victims who have injury claims that are worth more than the at-fault driver’s liability coverage. We recommend that all drivers carry $100,000.00 per person and $300,000.00 per accident in UIM. If you endure serious injuries and the at-fault driver has just $30,000.00 per person in injury liability coverage, and if the insurer offers their coverage limit, you would be able to collect $70,000.00 in additional coverage through the UIM policy.
UIM is also stackable in North Carolina. To determine the total amount of UIM coverage, you add up the per-person limits on all applicable UIM policies, then subtract the liability coverage amount (which you collect from the at-fault driver’s policy). For example, consider an innocent driver who is injured while driving their friend’s car, and the at-fault driver’s insurer agrees that their coverage is insufficient and they offer their coverage limit of $30,000.00. If the driver’s friend had $100,000.00 in UIM, the driver has her own policy with $100,000.00 in UIM, and the driver lives with a parent who has another policy with $50,000.00 in UIM, the total coverage available would be $250,000.00 – $30,000.00 from the liability policy and then the three UIM policies owe the additional $220,000.00.
When possible, it is wise to carry $250,000.00 per person and $500,000.00 per accident in UM & UIM coverage. UM & UIM premiums are relatively low, so for most driver this coverage will be affordable. Since this coverage pays you and your passengers in the event of injury, you should invest the additional premiums to make sure you have adequate protection and an opportunity to collect fair payment if you, your passengers or your family ever endure injuries in a collision.
Choose The Right Attorney to Represent You
With our Charlotte car accident lawyer located in North Carolina, we will help you more fully understand the different types of car insurance coverage and why that is an important bit of information to have under your belt. Carl Nagle is here with the experience and skills necessary to help you when an accident occurs. Contact us today!