North Carolina Expands Underinsured Motorist Coverage: What Drivers Need to Know

North Carolina recently made changes to its insurance law. As of July 1, 2025, the state began requiring that all new insurance policies include underinsured motorist (UIM) coverage. The requirement also applies to renewed policies. The change provides additional protection for drivers compared to the minimum liability coverage they previously carried.

What this change means

Prior to the change in the law, many drivers in North Carolina carried policies with the following minimum liability limits:

• $30,000 per person and $60,000 per accident for bodily injury
• $25,000 per accident for property damage

After the updates, the new requirements are:

• $50,000 per person and $100,000 per accident for bodily injury
• $50,000 per accident for property damage

In the past, the minimum-limit policies typically did not include underinsured motorist coverage. In practice, this meant that if a driver sustained injuries from a person whose insurance limits were insufficient, that driver would often face substantial out-of-pocket expenses.

Under the new law, the same driver’s policy would automatically have UIM coverage, which would provide additional protection if the at-fault driver’s insurance was inadequate.

Key changes to UIM coverage

Here are the three main changes that all North Carolina drivers should understand about UIM coverage.

1. Determining underinsured status based on total damages

The new law states that insurers will determine underinsured status based on the total damages the injured person sustains. In the past, the at-fault driver’s policy limits served as the determining factor.

Example:
Jane sustains injuries in a collision that causes her to suffer $75,000 in medical bills. The at-fault driver has only $50,000 in liability coverage, leaving her with a $25,000 gap between the coverage and her true losses. Under the new law, Jane’s UIM coverage can kick in to cover that $25,000 gap, allowing her to recover for her total damages.

2. No setoffs against other coverage (except workers’ compensation)

Workers’ compensation coverage will still offset UIM coverage, but no other claims will reduce coverage.

Example:
John took out a policy that included optional MedPay coverage of $10,000. He applied that insurance toward his medical costs for a serious car accident. Now, the MedPay amount will not cause a reduction to his UIM payout for the same accident. He can recover the full amount up to his UIM limits.

3. Stacking UIM coverage across multiple policies

If a person takes out multiple policies, their total UIM coverage will now be the sum of the highest limits available under each policy. Insurers cannot reduce or set off the amounts except where explicitly required by statute.

Example:
Maria has two auto policies. Under Policy A, she has $50,000 in UIM coverage. Her second policy, Policy B, includes $25,000 in UIM coverage. If she sustains injuries because of an underinsured driver, her UIM coverage stacks the two policies for $75,000, allowing her to recover a greater amount of damages if her injuries result in medical bills that exceed either policy on its own.

Why this change matters

Without UIM coverage, drivers may face medical expenses and lost wages if they are involved in a collision with a driver who injures them, but doesn’t have adequate insurance coverage. Automatic inclusion of UIM coverage prevents situations where a person is injured and faced with significant debt because they didn’t realize that their coverage won’t protect them if another motorist carries too little coverage. The ability to stack coverage is also helpful as it allows drivers with multiple vehicles or family members on the same policy to maximize protection.

Example scenario

Tim is involved in a serious car accident caused by an underinsured driver. His total damages, including medical bills, lost income, and property damage, amount to $90,000. Unfortunately, the at-fault driver has just $50,000 in liability coverage.

Tim has two UIM policies. One policy includes $25,000 in UIM coverage, and the other has $20,000 in UIM coverage.

In this case, the at-fault driver’s insurer would be responsible for covering $50,000 in damages. However, Tim would still be out $40,000 (90,000 – $50,000 = $40,000). Here, Tim’s UIM coverage from his two policies adds up to $45,000 ($25,000 + $20,000 = $45,000). The total available coverage for Tim here would be $95,000 ($50,000 + $45,000 = $95,000). As a result of the stacked policies, Tim can recover his full $90,000 in damages and will incur no out-of-pocket costs.

Bottom line

As of July 1, 2025, all North Carolina drivers with new or renewed auto policies are benefitting from stronger UIM protections. Determining underinsured status will be based on total damages; insurers cannot reduce damages against other coverages, and drivers may stack multiple policies. The law now offers better financial protection for those injured in accidents caused by underinsured motorists.

If you’re a driver in North Carolina, you should review your existing policies to understand current UIM coverage. If you don’t have much, consider adding additional policies so that you have the option of stacking to maximize your protection. Remember that UIM benefits operate independently of other coverage offsets (except workers’ compensation).

Even with ample UIM insurance coverage, you should be sure to have an attorney who can help you make your case for damages. Once you file a UIM claim, your insurer may become adversarial as they want to keep their costs low. Your attorney can negotiate and litigate the claim on your behalf.

At Price, Petho & Associates, PLLC, our attorneys are here to help you seek accountability and recover compensation after a car accident. Call us today or fill out our contact form to speak to an experienced car accident lawyer.