Consumer's guide to automobile insurance

              Insurance is a complex issue, and it is the responsibility of the North Carolina Department
of Insurance to keep consumers informed. This booklet will help explain the basic
automobile insurance coverages, discuss factors that influence your rates, describe what is
involved in settling your claim and answer some of the most frequently asked questions
from consumers in North Carolina.
In addition to the information contained in this guide, I encourage you to take the time
to read your personal automobile policy. This will allow you to become familiar with the
specific language of your policy.
The North Carolina Financial Responsibility Laws require that Automobile Liability
coverage be maintained. The minimum coverage requirements are $30,000 Bodily
Injury for each person, $60,000 total Bodily Injury for all persons in an accident and
$25,000 for Property Damage.
Insurance companies and their agents are required to offer Uninsured Motorist and
Combined Uninsured/Underinsured Motorist coverage. If you do not wish to have
this coverage, it must be rejected in writing.
We are very proud of the services our department provides to the citizens of North Carolina. The North Carolina
Department of Insurance makes consumer advocacy its highest priority. The Consumer Services Division will be
happy to answer any questions you may have. Feel free to contact this Division toll-free at 1-800-546-5664.
	
	
	
	
	
	
	
	
Jim Long
Commissioner of Insurance
A Message from the Commissioner
Table of Contents
Basic Automobile Insurance Coverages 2
Chart of Primary Coverages 4
Miscellaneous Coverages 5
How Rates are Determined 5
North Carolina Safe Driver Incentive Plan 6
Insurance for High Risk Drivers 8
Insurance Tips 9
Losing Your Insurance 11
After the Accident 12
Frequently Asked Questions 14
Consumer Services and Complaints 17
Glossary and How to Reach Us 18
Consumer Complaint Form 19
Automobile insurance is used to protect you against
expenses you may not otherwise be able to afford
if you are involved in an automobile accident.
The automobile policy is a combination of several
individual types of coverages. (Review your policy or
contact your agent to identify the limitations and exclusions
for the following coverages.)
Liability Coverage (required by N.C. law)
Your Liability coverage will pay
for bodily injury and
property
damage for
which any
covered
individual
becomes
legally
responsible. The Personal Automobile Policy will
cover you or any family member while using any
automobile or trailer, and any person using your
covered automobile with permission. The policy will
pay up to the limits listed in your policy.
Under this coverage you will have separate limits of
liability per person injured and limits of liability per
accident. This is called split limits. For example,
you may have limits of 100/300/50. This would
mean your policy would pay up to a maximum of
$100,000 to any one person injured by a covered
driver or up to $300,000 for all injured parties
combined, as a result of a single accident. Also, this
coverage has a single limit of liability for all property
damage resulting from any one accident. Using the
above example of 100/300/50 limits, you will have a
limit of $50,000 Property Damage Liability for each
accident.
The liability section can be separated into three parts:
Bodily Injury Liability, Property Damage Liability
and Supplementary Payments.
Bodily Injury Liability
This coverage will pay for damages to other people as
a result of an accident caused by you or another covered
driver. Examples of damages include medical and funeral
expenses, lost wages, disability, rehabilitation, pain and
suffering, law suit settlements and legal expenses.
Property Damage Liability
This coverage will pay for damages to other people’s
property as a result of an accident that is caused by you or
another covered driver. Examples of damages include the
repair or actual cash value (ACV) of another individual’s
automobile or other property and legal expenses.
Supplementary Payments
This coverage is in addition to your stated limits
of liability. (Review your policy or contact your agent to
identify the limitations and exclusions for this coverage.)
This section provides payment on accident related
expenses involving:
1. Bail bonds;
2. Premiums on appeal bonds and bonds to release
attachments;
3. Costs taxed against an insured and interest
accruing after a judgment is entered;
4. Loss of earnings because of attendance at
	
hearings or trials at the insurance company’s
request;
5. Expenses for emergency first aid to others at
an accident involving a covered auto; and
6. Other reasonable expenses incurred at the
	
insurance company’s request.
Basic Automobile Insurance Coverages
Coverage for Damage to Your
Automobile
This coverage is for direct and accidental loss to your
covered automobile, or any non-owned automobile that
meets the following definition:
1. Any private passenger automobile or trailer not
owned by or furnished or available for the
	
regular use of you or any family member while
in the custody of or being operated by you or
any family member.
2. Any auto or trailer you do not own while being
used as a temporary substitute for your covered
auto because of its breakdown, repair, servicing,
loss or destruction.
Collision
Collision means physical damage to your covered vehicle
caused by an impact with another vehicle or object. This
coverage pays the lesser of the cost of repair or ACV of
your automobile.
Other Than Collision (Comprehensive)
This coverage pays the cost of repair or ACV of your
automobile less any deductible. Losses caused by the
following are considered comprehensive claims:
1. Missiles or falling objects;
2. Fire;
3. Theft or larceny;
4. Explosive or earthquake;
5. Windstorm;
6. Hail, water or flood;
7. Malicious mischief or vandalism;
8. Riot or civil commotion;
9. Contact with a bird or animal; or
10. Breakage of glass.
Medical Payments Coverage
This coverage pays for reasonable and necessary
medical and funeral expenses due to an
automobile accident. Individuals covered
under this coverage include:
1. You or any family member while
	
occupying any automobile, or as a
pedestrian when struck by a motor
vehicle; or
2. Any other person while occupying
your covered automobile or any
vehicle (private passenger automobile or trailer
licensed for road use) driven by you or a family
member.
The policy will pay up to the limits listed in your policy
for each individual injured.
The Medical Payments coverage will not provide
coverage for any expenses if the injuries occur while
occupying a motorized vehicle with less than four
wheels.
Uninsured/Underinsured Motorists
(UM/UIM) Coverage
Uninsured Motorists (UM) Coverage
Your Uninsured Motorist coverage will provide protection
when an uninsured driver, who is at-fault, injures you
or another covered individual. It also provides property
damage coverage.
Underinsured Motorists (UIM) Coverage
This coverage will provide protection when an
underinsured driver, who is at-fault, causes injury to a
covered individual. An underinsured driver is one whose
limits of liability are less than your UIM limits, and not
enough to cover the losses of the people the underinsured
driver injures in an at-fault accident.
UIM coverage does not provide protection against
property damage. The UIM coverage will pay a
maximum of the difference between the other driver’s
Liability limits and your UIM limits.
Caution: Your insurance company will not provide coverage
if you or your legal representative
settles the bodily injury or property
damage without the company’s
written consent.
Chart of Primary Coverages
Type of coverages What does it pay for? Who (or what) is covered? Is it required?
Liability Bodily injury and property
damage for which a covered
driver becomes legally liable
You and your family, or anyone driv-ing
your covered automobile with
permission
Yes; state law requires
minimum limits
Collision Damage to your covered
automobile
Your covered automobile or
non-owned automobile
No; May be required
by lender
Comprehensive Damage to your covered
automobile, caused by: missiles
or falling objects, fire, theft or
larceny, explosion or earth-quake,
windstorm, hail, water
or flood, malicious mischief or
civil commotion, contact with
a bird or animal or breakage
of glass
Your covered automobile or
non-owned automobile
No; May be required
by lender
Medical Payment
Coverage
Necessary and reasonable
medical and funeral services
You and your family, or anyone
occupying your covered automobile
No
Uninsured/
Underinsured
Motorist Coverage
Bodily injury and property
damage for which another
driver becomes legally liable
You and your family, or anyone
occupying your covered automobile
No
Miscellaneous Coverages
These coverages may be purchased in addition to your
basic automobile coverages. You will be charged an
additional premium for electing the following coverages.
(Review your policy or contact your agent to identify any
applicable limitations and exclusions.)
Automobile Death Indemnity, Specific Disability and
Total Disability Benefits Coverage
This endorsement will provide a benefit for death,
dismemberment, specific disability and total disability
resulting from an automobile accident.
Miscellaneous Type Vehicle Endorsement
Motorcycles, golf carts, travel trailers and
other similar type vehicles are afforded
coverage by this endorsement. If your
covered vehicle is a motorcycle, the
endorsement will extend the
medical payments coverage
to motor vehicles with
fewer than four wheels.
Coverage for Rented Vehicles
This endorsement provides coverage for you or a family
member who rents a rental vehicle on a daily basis for less
than 22 consecutive days.
Coverage for Damage to Your Auto
(Customizing Equipment Coverage; Coverage for
Audio, Visual, and Data Electronic Equipment)
Through this endorsement, the limits of liability are
increased for custom furnishings and custom equipment,
and for additional permanently installed electronic
accessories.
Towing and Labor Costs Coverage
This coverage pays for towing and labor costs each time
your covered automobile or any non-owned automobile
is disabled or the keys are lost, broken or accidentally
locked in the car.
Extended Transportation Expenses Coverage (Rental
Reimbursement)
This coverage will pay, up to a specified rate and
maximum total amount, transportation expenses incurred
by you or loss of use expenses for a non-owned vehicle for
which you become legally responsible.
Underwriting is the process by which an insurance
company considers your application and evaluates your
driving record and other factors to see if you meet its
guidelines. Insurance companies use a variety of factors to
determine the level of risk each applicant presents. Each
company will use its own underwriting guidelines to decide
whether or not to insure a driver voluntarily. Some of the
most common factors are: your driving record, where you
live, type of automobile and use of automobile.
Your Driving Record
Your driving record will have the largest impact on your
insurance premium. North Carolina insurance points are
charged for at-fault accidents and convictions for moving
violations that occur within the experience period (see
chart on page 6). The experience period is the three
years immediately preceding the date of application or the
preparation of the policy renewal.
Where You Live
The area you live in will also affect your rate. Insurers
will consider vehicle and population density, road con-ditions,
repair rates, hospital and medical costs, and the
number of accidents and other claims in a particular area.
Normally, urban areas have higher rates than rural areas.
Type of Automobile
The likelihood of theft, cost of repair and replacement,
and the style of vehicle (sports car, SUV, station wagon,
etc.) will influence your premium. For example, a sports
car will normally have a higher premium than a family
sedan.
Use of Automobile
The more you use your vehicle the more you may pay in
premium. A vehicle you drive 20 miles to work everyday
is considered a greater risk than a vehicle only used
occasionally.
How Rates are Determined
North Carolina Safe Driver Incentive Plan
Maintaining a clean driving record can pay off. To
reward safe drivers with the lowest possible insurance
rates, the General Assembly enacted the North
Carolina Safe Driver Incentive Plan (SDIP). Drivers
who are convicted of moving traffic violations and/or
cause accidents will be charged higher premiums in
accordance with their driving records. SDIP points
are charged as follows for convictions and at-fault
accidents occurring during the Experience Period:
SDIP
Points
Convictions and At-Fault Accidents
12
Manslaughter or negligent homicide
Prearranged highway racing or lending a car for prearranged highway racing
Hit-and-run resulting in bodily injury or death
Driving with a blood-alcohol level of .08 or more
Driving commercial vehicle with a blood-alcohol level of .04 or more
Driving while impaired
Transporting illegal intoxicating liquor for sale
10 Highway racing or lending a car for highway racing
Speeding to elude arrest
8 Driving during revocation or suspension of license or registration
Aggressive driving
4
Reckless driving
Hit-and-run resulting in property damage only
Passing a stopped school bus
Speeding in excess of 75 mph when the speed limit is less than 70 mph
Speeding in excess of 80 mph when the speed limit is 70 mph or greater
Driving by a person less than age 21 after consuming alcohol or drugs
3
At-fault accident that occurs before Jan. 1, 2004, resulting in death, or bodily injury* in excess of $1,500 or
property damage of $2,500 or more**
At-fault accident that occurs on or after Jan. 1, 2004, resulting in death, or bodily injury* in excess of $1,800
or property damage of $3,000 or more**
2
Illegal passing
Following too closely
Driving on wrong side of the road
At-fault accident that occurs before Jan. 1, 2004, resulting in property damage in excess of $1,500, but less
than $2,500**
At-fault accident that occurs on or after Jan. 1, 2004, resulting in property damage in excess of $1,800, but
less than $3,000**
Speeding more than 10 mph over the speed limit provided the total speed is in excess of 55 mph, but less
than 76 mph
Speeding 10 mph or less in excess of speed zone of 55 mph or greater
1
All other moving violations
At-fault accident that occurs before Jan. 1, 2004, resulting in bodily injury* of $1,500** or less, or property
damage in of $1,500 or less**
At-fault accident that occurs on or after Jan. 1, 2004, resulting in bodily injury* of $1,800** or less, or prop-erty
damage in of $1,800 or less**
Speeding 10 mph or less in excess of speed limit of less than 55 mph
* No SDIP points will apply for Bodily Injury if the insured furnishes proof that costs were solely for diagnostic purposes.
** The greatest number of points will be applied for at-fault accidents resulting in Property Damage and Death or Bodily Injury.
Special Exemptions
No SDIP points will be charged for:
An accident provided all of the following are true:
• There is property damage only;
• The amount of damage is $1,500 or less;
• There is no conviction for a moving violation
in connection with the accident; and
• No licensed operators in the household have
convictions or at-fault accidents during the
	
experience period. (An insurance company
may require that the insured be covered by
	
that company for six continuous months.)
Speeding 10 mph or less over the posted speed limit;
provided all of the following are true:
• The violation did not occur in a school zone; and
• There is not another moving traffic violation for
the experience period (an isolated Prayer for
Judgement Continued [PJC] will not count as a
prior conviction for the purpose of this
	
exception).
One PJC for each household every three years;
however:
• A second PJC may cause points to be charged
according to the underlying convictions.
Points
% of Rate
Increase
Cost if Basic
Rate is $300 Points
% of Rate
Increase
Cost if Basic
Rate is $300
1 25% $375 7 160% $780
2 45% $435 8 190% $870
3 60% $480 9 225% $975
4 80% $540 10 260% $1,080
5 105% $615 11 300% $1,200
6 130% $690 12 340% $1,320
Insurance Points Will Cost You Money
Insurance for High Risk Drivers
What is a High-Risk Driver?
When an insurance company considers you a high-risk
driver, it will be harder to obtain insurance, especially at
better rates. Usually drivers are considered a high risk
because of tickets or accidents, reckless or drunk driving
history or being an inexperienced operator.
What is an Inexperienced Operator?
An inexperienced operator is a licensed driver who has
less than three years driving experience. Adding an
inexperienced operator will cause a significant increase in
your premium.
The following chart gives examples of some basic
rates for inexperienced operators in the same area.
The chart includes no insurance points for drivers
in the household. Also, this chart does not take
into account discounts and deviations individual
insurance companies may apply to the final rate.
The coverages considered in the chart are:
• Property Damage and Bodily Injury
	
Liability;
• Uninsured and Combined Uninsured /
	
Underinsured Motorist Coverage with
	
the same limits as the Liability Coverage
	
Limits and;
• Medical Payments Coverage with limits of
	
$1,000.
Inexperienced Drivers Will Influence Your Premium
Type
of Policy
Experience
30/60/25
Limits
100/300/50
Limits
250/500/50
Limits
0 to 1 year $641 $759 $802
1 to 2 years $488 $570 $618
2 to 3 years $423 $497 $413
more than 3 years $145 $193 $225
Rates are determined with one licensed driver on the policy.
Single
Car
Policy
Reinsurance Facility
Since the financial responsibility laws require
individuals to be covered for Bodily Injury Liability
and Property Damage Liability up to the minimum
limits, insurance companies cannot refuse to write
those coverages. If they do not want to bear the
risk, insurance companies will place high-risk
drivers in the reinsurance facility. The purpose
of the facility is to assure the availability of motor
vehicle liability insurance to all eligible risks. The
types of coverage offered are:
1. Bodily Injury Liability from the minimum
limits required to a maximum of $100,000
each person, $300,000 each accident;
2. Property Damage Liability from the
	
minimum limits required to a maximum of
$50,000 each accident;
3. Medical Payments Coverage from $1,000 to
a maximum of $2,000 each person; (This
	
coverage is not available for motorcycles.)
4. Underinsured Motorist Coverage to a
	
maximum $1,000,000 each person and each
accident for Bodily Injury Liability; and
5. Uninsured Motorist Coverage from the
	
minimum limits required of Bodily Injury
Liability and Property Damage Liability to a
maximum of $1,000,000 each person and each
accident for Bodily Injury Liability, and
	
$50,000 for property damage (with a $100
deductible).
Options for High-Risk Drivers
It may be difficult for a high-risk driver to obtain
Collision, Comprehensive and other coverages that are
not offered through the reinsurance facility. The most
common method is through a company that writes non-standard
business.
Your company may ask you to sign a “consent to rate”
form. This would mean that you agree to pay rates
higher than what has been filed with the North Carolina
Department of Insurance in order for the company to
write the coverage.
Examples of Discounts, Deviations and Credits
You may want to ask your agent or company if you are
eligible for any discounts. Following are some examples of
discounts being offered:
• Your vehicle has anti-lock brakes.
• Your vehicle has an anti-theft device.
• Your vehicle has daytime running lights.
• You agree to a checkless pay plan (electronic
funds transfer).
• You are renewing your policy and did not have a
loss or conviction during the last policy period.
• You are considered a mature driver (normally age
55, but ages for eligibility can vary by company).
• You have more than one automobile on the same
policy.
• You have insurance on your home and
	
automobile with the same company.
• Your vehicle has a passive restraint system (air
bags, automatic seat belts and other safety
	
equipment may qualify).
Insurance Tips
Increase Deductibles
You can lower your premium by increasing your
deductibles. You can choose the deductibles on your
comprehensive and collision coverages. In doing this you
will want to consider how much of a loss you can afford
to absorb if you have a claim.
Shop Around (Comparison Shopping)
Shop around, you may find substantial differences
between quotes. Make sure you are comparing
identical coverages when comparing companies. Make
sure you are dealing with licensed agents and
companies. You can check this by contacting the
North Carolina Department of Insurance at
1-800-546-5664.
You can also check a company’s ratings. Some
examples of organizations that rate insurance
companies are A.M. Best, Moody’s Investors Service,
Standard and Poor’s Corporation (S&P) and Weiss
Research. You can typically find information offered
by these organizations at your local library or on the
Internet.
10
Paying Your Premium
Pay your premium in full. Also, pay on or before the
due date to avoid the risk of cancellation. There is NO
GRACE PERIOD for automobile insurance. Use a
check or money order. If you use cash, request a receipt,
and keep it in a safe place.
Pay your premiums even if you disagree with your
insurance company. Failure to make premium payments
may cause cancellation of your policy.
Some consumers choose to finance their premium.
The method most commonly used is by way of a
premium finance company. When dealing with
a premium finance company you should note the
following.
• You are reaching a separate agreement with the
finance company. Your insurance company is
not lending you the
money.
• The finance charges
and fees associated
with the loan will
increase your total cost of insurance.
• The finance agreement must be in writing,
dated and signed by you. Before the first due
date of the first installment, the finance
	
company must deliver a copy of the agreement
to you or mail to your address as shown on the
agreement.
• You should ask your agent for an explanation of
the charges and fees associated with the
	
agreement.
Before You Buy a Car
Before you buy your car ask about the cost of
insurance. Some makes and models are higher risks
than others and could result in a higher premium.
With a few models, you may have trouble finding
companies willing to provide Comprehensive and
Collision coverages.
Driving Record
Maintain a clean driving record. A key element in
determining your rates is your driving record.
Remember that insurance points will remain on your
record for three years.
Parents of Teenagers
If your child does not own a car, make sure the insurer
knows which car the teen will be driving and whether it
will be primary or occasional use.
Coverages
If you have an older model vehicle and it is not
financed, the benefit from the purchase of
Comprehensive and Collision coverages might not be
worth the cost.
Read Your
Policy
Read your policy and
make sure that it lists all
coverages you have requested.
Insurance Identification Cards
Make sure you have an insurance identification
card. This will provide the necessary insurance
information required from you at the time of an
accident.
1
Insurance companies have the right to terminate your
coverage; however, they must follow the guidelines listed
in your policy to do so. The three ways your policy can
be terminated are cancellation, nonrenewal and automatic
termination.
Cancellation
Cancellation is when your policy is terminated
during the policy period. You may cancel your policy
by returning the policy to the company or agent or
giving the company advanced written notice of the
date you wish to cancel the policy.
Liability, Medical Payments and Uninsured
Motorists or Combined Uninsured/Underinsured
Motorists Coverages
Your company may cancel your Liability, Medical
Payments and Uninsured Motorists or Combined
Uninsured/Underinsured Motorists coverages by
mailing to your last known address:
1. At least 15 days notice, if cancellation is for
non-payment of premium; or
2. At least 60 days notice for all other cases.
There are certain reasons your company may cancel
your Liability, Medical Payments, and Uninsured
Motorist or Combined Uninsured/Underinsured
Motorist coverages:
1. Non-payment of premium;
2. You are no longer a resident of North Carolina
and are not eligible for a policy through the
reinsurance facility.
3. The insurance company terminates its contract
with your insurance agent;
4. Your premium finance company cancels the
policy according to the finance contract;
5. If you knowingly make a material
	
misrepresentation of:
a. The years of driving experience; or
b. The driving record of you or any other
	 driver who lives with you and customarily
	 uses your covered automobile.
Collision, Comprehensive, and Coverages Other Than
Those Previously Listed
Your insurance company may cancel any coverage other
than your Liability, Medical Payments and Uninsured
Motorists or Combined Uninsured/Underinsured
Motorists by mailing to your last known address at least
10 days advance notice.
Insurance companies review many different factors to
determine whether the policy continues to meet their
underwriting criteria. Some of the factors that may lead
to cancellation or nonrenewal are:
• Non-payment of premium. Remember there
is NO GRACE PERIOD for automobile
	
insurance;
• Excessive claims or accidents;
• Traffic violations;
• And no longer meeting company guidelines
(Examples include adding a sports car or
	
adding an inexperienced operator).
Nonrenewal
Nonrenewal denotes your company’s refusal to renew
your policy. An insurance company can nonrenew
your Liability, Medical Payments and Uninsured
Motorist or Combined Uninsured/Underinsured
Motorist coverages by mailing to your last known
address at least 60 days notice before the end of
the policy period. Any other coverage may be
nonrenewed by mailing to you at least 10 days notice
before the end of the policy period.
Automatic Termination
If the insurance company offers to renew or continue
your coverage and you do not accept, the policy will
automatically terminate at the end of the current
policy period. Failure to pay the required premium
to renew or continue your policy will mean you do
not accept the offer.
If you purchase other insurance on your covered
automobile, any similar insurance provided by the
initial policy will terminate. The termination will
occur on the effective date of the other insurance.
Losing Your Insurance
12
Accident Checklist
√ Stop your car in a safe place.
√ Move your car, if needed, to protect against
further damage and keep from blocking traffic.
√ Call the police, especially when there are
	
injuries or hit and run accidents.
√ Get information:
1. The other driver’s name, address, phone
number, license plate number, driver’s
license number and insurance information.
2. The witness’ name, address and telephone
number.
3. Insurance information needed: name of
company and policy number exactly as
shown on the other driver’s proof of
	
insurance card.
√ Don’t agree to forget about the accident. You
may have hidden damages, unknown injuries
or later find that a lawsuit has been filed
	
against you.
√ Call your agent if you have any questions or
concerns with the claims process. Your agent
could be of assistance when filling out forms
and documents required to proceed with your
claim.
Who do I call to file a claim?
• Your agent or insurance company.
• If another individual is responsible for your
damages, you need to contact their insurance
agent or company.
• The adjuster you are assigned will inform you
of any additional steps needed.
How will a company determine
who is at-fault?
The insurance adjuster investigating the accident
will attempt to determine who is negligent or
at-fault. The Automobile Liability coverage will
pay for bodily injury and/or property damage for
which any insured becomes legally responsible due to
negligence.
North Carolina Contributory Negligence Law bars
a driver from collecting damages if determined to be
partially at fault. In essence, if you contribute to an
accident, you may not be able to collect on a liability
claim. Any disagreement will ultimately have to be
resolved in a court of law.
If Your Car Can Be Repaired
The insurance company is responsible for the cost to
repair your vehicle. This does not necessarily mean
the estimated amount by the repair facility of your
choice. If the company can have the same repairs
completed at a lower cost from another shop, you may
be required to pay the difference.
No insurance company can require the use of after
market parts in the repair of your vehicle unless the
part is equal to the original part in terms of fit, quality,
performance, and warranty. Any modifications made
necessary because of the use of after market parts shall
be included in the estimates. You can choose not to
have after market parts placed on your car, but you
may be responsible for any additional cost.
The insurance company may deduct for depreciation
when they allow for an entire paint job or when such
items as tires and batteries are replaced. Depreciation is
the decrease in value of the vehicle or part because of age
or wear and tear.
Refunds
There are two ways of calculating your refund after
cancellation, pro-rata cancellation and short rate
cancellation.
Pro-Rata Cancellation:
This type of calculation is used when the company
cancels your policy. It will generate your refund,
without any penalty, for canceling during the policy
period.
Short Rate Cancellation:
This type of cancellation may be used when you cancel
the policy. It will generate your refund including a
penalty for canceling during the policy period. The
penalty amount varies according to the total premium
and the amount of time left in the policy period.
After the Accident
13
If Your Car Must be Totaled
If a motor vehicle is damaged, to the extent that the total
cost of repair is equal to or exceeds 75 percent of the
pre-accident actual cash value (ACV), the insurer shall
consider the vehicle a total loss.
When your car is totaled, the insurance company is
responsible for its ACV. ACV represents the local
market value of the totaled vehicle.
There are two methods to determine local market value:
1. By using the local market price of a
	
comparable vehicle; or
2. If no comparable vehicle can be located, dollar
estimates from at least two qualified dealers
within the local market area are normally
used.
If You are Injured
Medical Payments coverage, if purchased, can provide
some assistance for your doctor and hospital bills,
regardless of fault.
Bodily injury claims can include doctor and hospital bills,
laboratory fees, lost wages and pain and suffering that are
a direct result of the accident.
The General Statutes of North Carolina establish no
guidelines pertaining to the determination or calculation
of any amount owed to you for pain and suffering.
Therefore, if you and the insurance company cannot
agree on the value of your claim you may wish to seek
legal advice.
14
Frequently Asked Questions
Automobile Insurance Basics
What happens if I have a lapse of liability
insurance?
Whenever your liability coverage is cancelled or
nonrenewed, your insurance company is required to
notify the North Carolina Division of Motor Vehicles
(DMV). The DMV is required to notify you when they
receive the notification. If there is a penalty, the DMV
will advise you of such and what action, if any, that you
need to take.
Will my policy provide the required liability coverage
when traveling to other states?
Yes, your policy will automatically meet the minimum
requirements of other states in which you are traveling.
What about driving in Canada and Mexico?
Your policy will cover you and meet the requirements of
Canada. Your policy WILL NOT cover you in Mexico.
In the border states, you can purchase Mexican liability
policies from agents who specialize in it.
Are family members covered by my policy?
Yes, family members are insured under your policy.
Family member is defined in your policy as a person
related to you by blood, marriage or adoption who is
a resident of your household. This includes a ward or
foster child.
Do I need to purchase coverage when I rent a car?
Under certain conditions your automobile policy may
provide coverage while using a rental vehicle. However,
contact your agent for specifics.
Is flood damage covered?
Yes, if you have purchased the Comprehensive
coverage.
Are cell phones and stereo equipment covered?
Stereo equipment, cell phones, televisions, scanners and
other media may be covered under certain conditions.
You should check with your agent to make sure you are
properly covered.
When I buy an additional car or replace a car, is the
new car covered automatically?
Yes, as long as you notify the insurance company
within 30 days after acquiring a new vehicle.
Additional vehicles will have the broadest coverage
of any vehicle listed on your policy. Replacement vehicles
will have the same coverage as the vehicle it replaced.
If you do not notify the company within 30 days, there
will be no automatic coverage.
What happens if I drop coverage on a financed vehicle?
First, it is a violation of your finance contract and may
put your loan in jeopardy. Second, the lender could
place single interest coverage on the vehicle and add the
premium to the loan. The coverage is expensive and does
not provide any coverage for you.
What if I buy a motorcycle?
The automobile policy, if not amended, does not provide
any coverage. You can endorse your policy so that it will
extend the coverages to your motorcycle.
Insurance for Young Drivers
I’m going to college in another state, and my car is still
registered in North Carolina. Will my (or my parents’)
North Carolina policy cover me?
Yes, coverage would still apply. Your premium may be
adjusted because of where the vehicle is now located.
My daughter is going away to college. Can my
company force me to keep her on the policy if I want to
remove her?
Yes, your company still must cover her as long as her
permanent residence is your home. Even if she doesn’t
have a vehicle with her, your policy covers her for liability
when she may borrow a vehicle at school and when at
home on visits.
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I’m enlisting in the military.  Does my policy still
cover me if I’m stationed in another state?
Your policy will automatically meet the other state’s
liability requirement. When it is time to renew your
policy you may be required to purchase insurance in the
state where you are stationed.
My son has received his driver’s license.  Do I have to
add him to my policy if he drops his own insurance
policy?
Yes, as long as he is a resident of your household.
However, you must notify your agent or company.
Failure to do so could jeopardize your coverage.
My 19-year-old son no longer lives with me.  What
can I do to remove him from my policy if the company
wants to keep him on my policy?
Showing proof of insurance with another company can
help you remove him. Also, show the company any
documents that will help prove that a change of address
has taken place. Examples of these documents can
include lease agreements, utility billings or receipts, and a
current driver’s license.
Does my child have to be rated on the most expensive
vehicle?
No, the rates should apply to the vehicle your child
principally operates. If the child is an occasional
operator, the rates would apply to the vehicle your child
most frequently operates.
How Rates Are Determined
Why does my insurance cost more than my agent said
it would?
A quote is an estimate of your premium. It does
not offer a firm price or contract. If your agent
misquoted the premium, your company must correct
it by billing you for the correct premium or refunding
the overpaid amount. Being accurate with your driving
information is the best way to assure correct premium
charges.
Why is it harder to get insurance if drivers in my
household have bad driving records?
When the individuals residing in your house have
bad driving records, the company knows it has an
increased risk. Your company will consider that risk
when underwriting the policy. According to the Liability
Coverage section of your policy, any family member is
considered an insured. Anyone driving your covered
vehicle with permission is also covered by your policy.
Losing Your Insurance
Does an insurance company have to tell me why it
cancelled my insurance policy?
Yes, a company must give the reason(s) why your policy
was cancelled and the date termination is effective.
Can a company refuse to renew my policy because of
claims that were not my fault?
Your company can nonrenew your Comprehensive and
Collision coverages if you do not meet its underwriting
criteria, as long as the company gives proper notification.
Many companies will use frequency of claims, taking into
account at-fault as well as fault-free claims, as one of their
criteria.
My company renewed my policy with another company
in the same group.  Can they do that?
Yes, if it gives you proper notification that your original
policy will be nonrenewed.
Why didn’t I get a notice that my insurance policy was
cancelled?
If canceling your Liability, Medical Payments and
Uninsured Motorist or Uninsured/Underinsured Motorist
Coverages for non-payment of premium, your company
must mail a notice to your last known address at least 15
days in advance. Sixty days notice is required for all other
reasons.
The insurance company is responsible for showing proof
that the notice of cancellation was mailed, not proof that
you did or did not receive it.
If canceling any coverage other than Liability, Medical
Payments and Uninsured Motorists or Uninsured/
Underinsured Motorists, your company must mail a notice
to your last known address at least 10 days in advance.
After the Accident
What does my policy require me to do after an
accident?
• Notify the insurance company of how, when
and where the accident or loss happened. This
should include the names and addresses of
anyone who is injured and any witnesses.
• Cooperate with the investigation.
• Obtain or authorize the insurance company
to obtain appropriate documents, medical
information and other pertinent records.
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When should I notify my insurance company?
As soon as reasonably possible, while the details are still
fresh in your mind.
What if the other driver’s insurance isn’t enough to pay
my bills?
Medical: Your Underinsured Motorists (UIM) coverage
will provide protection for the difference between the
other driver’s Liability Coverage and the limits under
your UIM coverage. You can find additional coverage
under the Medical Payments coverage portion of your
policy. Neither of these coverages are required by law.
Check with your agent and review your policy to make
sure you are adequately covered.
Property Damage: The difference can be covered by
your Collision coverage. Again, check with your agent
and review your policy to make sure you are adequately
covered.
If my only coverage is liability insurance, does my
policy cover my medical and car repair bills?
No, liability insurance only pays for other people’s
injuries and property damage for which an insured driver
becomes legally responsible.
The insurance company wants to total my car; I want
to fix it. What can I do?
You have the right to keep the salvage vehicle. When you
do, the insurance company will deduct the salvage value
from the actual cash value. If requested, the insurance
company must furnish you with the name and address
of a salvage dealer who will purchase the salvage for the
amount deducted.
What if the insurance company and I cannot agree on
the amount to be paid by my collision coverage?
You can elect to use the appraisal provision of your
policy. According to the provision, you and the insurance
company will each choose a competent appraiser. The
two appraisers will then select an umpire. The appraisers
will state separately the ACV and the amount of loss. If
they do not agree, they will submit their differences to the
umpire. A decision by any two will be binding.
The insurance company and the insured will pay its
chosen appraiser and bear the expenses of the appraisal
and umpire equally.
How can my loan balance be more than my insurance
company says my car is worth?
This can occur for many reasons including low down
payments, high interest rates and poor maintenance. You
may be able to purchase a type of insurance called
Guaranteed Automobile Protection (GAP). GAP
insurance covers the difference between ACV and your
loan balance. This is typically only available for new
vehicles. Otherwise, you can be held responsible for
the difference.
Can an insurance company tell me where to get my
car fixed?
No. An insurance company cannot require you to go
to a particular repair shop. An insurer can suggest a
repair shop. If the company can have the same repairs
completed at a lower cost from a different shop, you
may be required to pay the difference.
I don’t want to file a claim against my company
because it might raise my rates or refuse to renew
my policy, but I’m getting nowhere with the other
driver’s insurer.  Any advice?
An insurance company cannot charge insurance
points for an accident that was not your fault. Your
agent can give you advice about your company’s
underwriting and how the claim may affect your
policy.
If I am in an accident and someone else is at-fault,
do I get a rental car while mine is being fixed?
It is common practice for insurance companies to
allow a rental vehicle while your car is being repaired.
However, there are no statutes or administrative codes
that require an insurance company to offer a rental
vehicle.
Can the other driver’s insurance company delay
paying for my car repairs to pressure me into signing
a release on my injury claim?
No. If this situation were to arise, you can file
a formal complaint with the North Carolina
Department of Insurance.
How long can a company take to pay my claim?
After receiving a claim an insurance company has 30
days to pay the claim, make an offer of settlement,
deny the claim or advise the claimant that the
investigation of the claim is ongoing. Loss and claim
payments should be mailed or delivered within 10
business days after the claim is settled.
Is the company required to give me an explanation
of why it denied my claim?
Yes. The insurance company must provide a reasonable
explanation of why your claim was denied in relation
to the policy language or applicable law.
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Consumer Services and Consumer Complaints
The goal of the Consumer Services Division is
to respond promptly, clearly and courteously
to questions and complaints from the public
concerning insurance and to acquaint consumers
with alternatives and courses of action which a
citizen can pursue to solve a particular insurance
problem.
If you have a problem or concern with an
insurance company or agent, the North Carolina
Department of Insurance stands ready to assist
you.
A consumer complaint form is attached for your
convenience on page 19.
What We Can Do To Help
1. Forward a copy of your complaint to the
insurance company, if appropriate.
2. Obtain information or explanations on your
behalf from the insurance company or its
representatives. This may involve written and
oral contact with such company or
	
representatives.
3. Review in detail the information obtained
from the company for compliance with statutes,
regulations and policy contracts.
4. Serve as your advocate if we determine that
the position of the insurance company or its
representatives is unlawful.
5. Explain the provisions of your insurance
policy contract, as appropriate.
6. Suggest to you actions or procedures that you
may take which could aid in resolving your
insurance problem.
What We Cannot Do
1. Assume the role as your legal representative, in
or out of court.
2. Interfere in a pending lawsuit on your behalf.
3. Consult with you if you are represented by an
attorney, unless it is with written permission of
that attorney.
4. Make a decision as to disputes between
you and your insurance company or their
representatives which involve matters as to;
a. Who is negligent or at fault:
b. The facts surrounding the claim (that is,
who might be telling the truth in the matter
when accounts differ);
c. The value of a claim or the amount of
money owed to you; or
d. Any other disagreements between you
and another
party
	
as to what the
facts might be.
5. Deal with
situations or
companies that
are not subject
to the
	
insurance laws
of North
Carolina (such
as self-funded
health plans)
or with matters
governed by other
state agencies (such as Workers’
	
Compensation claims).
The North Carolina Department of Insurance pledges
to seek fair and equitable treatment of all parties in
insurance transactions. We are here to serve you.
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Glossary
Adjuster
A person licensed by the Department of Insurance whose
job is to evaluate the amount of loss and to recommend
the amount the insurance company will pay.
Agent
A person licensed by the Department of Insurance to
solicit and service insurance policies.
At-Fault
Negligent.
Claim
A request to an insurance company for payment of a
loss.
Coverage
The amount of risk covered by an insurer.
Deductible
The portion of each covered claim you are responsible
for paying.
Endorsement
An amendment to an insurance contract, creating a
change in the original terms.
Exclusion
A provision in an insurance contract that removes
coverage for certain losses or property.
Experience Period
The three years immediately preceding the date of
application or the preparation of renewal.
Family Member
A person related to you by blood, marriage or adoption
who is a resident of your household, including a ward or
foster child.
Insured
The person who is covered by the insurance contract.
Insurer
The insurance company that is underwriting the contract
of insurance.
Liability Insurance
Provides protection for the insured against loss arising out
of legal liability to third parties.
Limits
The maximum amount the insurance company will pay
in the event of a loss.
Negligence
The failure to act as a reasonably prudent person would
have acted under similar circumstances.
Occupying
Means in; upon; getting in, on, or off.
Premium
The amount paid in consideration for an insurance policy.
Premium Finance Company
A lending institution approved by the North Carolina
Department of Insurance, which finances insurance
premiums for a fee.
How to Reach Us
You can reach the North Carolina Department of Insurance Consumer Services Division at:
(800)546-5664 Toll free
(919)733-2032 Outside of North Carolina
(919)715-0319 TDD (Telephone Device for Deaf Caller)
(919)733-0085 Fax
You can find additional information as well as a downloadable
copy of our complaint form on the North Carolina Department
of Insurance web site at www.ncdoi.com.
The address for the North Carolina Department of Insurance
Consumer Services Division is:
Consumer Services Division
North Carolina Department of Insurance
1201 Mail Service Center
Raleigh, NC 27699
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NORTH CAROLINA DEPARTMENT OF INSURANCE
Jim Long, Commissioner
(Please type or print. Use additional sheets if necessary)
File Number: (office use only)
	
	
	
	
	
	
	
DR.
MR.
MRS.
MS.
SIGNATURE: 									 DATE:
	
	
	
	
	
PS-76
Revised 11/99
The Insurance Department is authorized to send a copy of this document(s) to any company or agency involved. I authorize the release of all
relevant information to the North Carolina Department of Insurance for its use in the review of this matter.
	 	 my name 	 	 	 	 	 	 name of insured
	 my address 	 	 	 	 insurance company
	 second address line (if needed) 	 	 	 	 	 agent
	 city 	 state zip 	 	 adjuster
	 county 	 	 date of loss 	 	 	 policy or group number
	 	 	 	 	 	 	 	 	 claim or certificate number
	
	
	
Type of Insurance (please check one): Life Health 	 Auto 	 Homeowners 	 Other
	
If Life or Health policy, show the state in which your policy/certificate was purchased:
Are you represented by an attorney in this matter? No 	 Yes Name
Details of complaint (attach copies of papers relating to this matter)
	
	
PLEASE DO NOT STAPLE
Phone: Work / 	 /
	
Home / /
Mail to: Consumer Services Division, NC Department of Insurance, 1201 Mail Service Center, Raleigh, NC 27699-1201
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