Written by attorney Michael E. Garland

North Carolina Insurance Coverage Primer

The purpose of insurance is to protect your assets. Auto insurance pays for physical injuries and damage to property that arises out of the operation, use or maintenance of a motor vehicle. Insurance coverage can be complicated. The policies seem to be written in a foreign language and it’s hard to determine what is covered and what is not covered. The following is a basic primer on auto insurance coverage. It is not meant to be an exhaustive discussion.

There are two classes of individuals who are insured on an insurance policy. A class I insured is the named inured on the policy and anyone who lives in the same household as the name insured and is related to the named insured by blood, adoption or marriage. A class II insured is anyone who is in the insured vehicle as a passenger or driver and is there with the consent of the vehicle owner.

Insurance coverage can be classified in two basic categories, first party coverage and third party coverage. First party coverage pays benefits to the insured. Examples of first party coverage are Uninsured Motorist Coverage, Underinsured Motorist Coverage, Collision Coverage and Medical Payments Coverage. Third party coverage pays benefits to individuals, other than the insured driver, who are injured or sustain property damage as a result of negligence on the part of the insured driver. Third party coverage consists of Liability Coverage.

Every vehicle must be covered by liability coverage. Failure to obtain liability insurance is a misdemeanor in North Carolina. The minimal amount of coverage required in North Carolina is $30,000 per person and $60,000 per accident. Negligent operation, use or maintenance is a condition precedent for liability coverage. In North Carolina coverage priority starts with the vehicle. This means that if you lend someone your car to someone and they cause an accident your insurance pays first.

First party coverage is typically optional, although some automobile finance and lease contracts require first party coverage. Uninsured motorist coverage protects the insured when she is involved in an accident caused by an uninsured driver. The policy limits are usually the same as the liability limits. Several situations can give rise to an uninsured motorist claim. First and most common is when the at-fault driver simply does not carry the requisite liability insurance coverage. Some other less known situations are when the at-fault driver was operating the vehicle without the consent of the owner or when the at-fault driver leaves the scene and cannot be identified (“phantom vehicle"). The latter situation requires that there be actual physical contact with the phantom vehicle. Also property damage is not covered in the latter situation.

Underinsured Motorist Coverage protects the insured when the at-fault driver’s coverage is not sufficient to adequately cover damages. The underinsured motorist carrier is entitled to an offset in the amount of the liability coverage, therefore Underinsured Motorist Coverage should be at least $50,000 and must be higher than the at-fault driver’s liability insurance limits. Underinsured Motorist Coverage is stackable meaning that an individual can benefit from all coverage in which he is a class I or class II insured.

Medical Payments Coverage or Medpay is a first party coverage that reimburses for medical expenses arising from the operation use or maintenance of a vehicle. Medpay is a contractual coverage. No showing of negligence is required. Both class I and class II insured’s are covered. The most common limits of coverage are $1,000 to $2,000, but higher limits are available.

Collision Coverage is a first party property damage coverage. Collision will cover damage to the insured vehicle if the driver is the at-fault party. Collision is also helpful in situations such as in collisions involving phantom vehicles since the property damage is not coverage by uninsured motorist covered in such situations. An often overlooked use is when the insurance company for the at-fault driver has denied liability or is dragging its feet in investigating and accepting liability. You can file your vehicle damage claim on your collision coverage to avoid delay in getting your car repaired or getting paid for your total loss. Your insurance company will file a subrogation claim to get its money (and your deductible) back from the at-fault driver’s insurance company.

The situations described in this article are fairly routine, but coverage issues can get very complicated. It is always best to contact a qualified personal injury attorney to discuss your particular facts.

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