Navigating North Carolina Auto Insurance

Anyone who has ever visited North Carolina can tell you the state is one of a kind, and North Carolina insurance is no different. While each state has its particular set of insurance oddities, there are a few things about North Carolina Auto Insurance that are worth noting.

Consent to Rate

The consent to rate process is entirely unique to North Carolina Insurance. The state sets a standard for what insurance companies charge, through a division called the North Carolina Rate Bureau (NCRB). Sometimes insurance companies determine that to provide you an accurate rate they need to charge more than the NCRB has suggested. If a company wants to charge you more than the standard set by the NCRB, they are required to obtain your signature indicating permission. If your insurance company is requesting that you sign the consent to rate form, and you don’t, you could wind up having your policy canceled.

Ceded Policies

Even though insurance companies are allowed to charge you more than the rate set by the state, there is a cap on how much over that limit the carriers can charge you for your insurance. In situations where the amount the insurance company wants to charge is higher than that cap, the North Carolina Reinsurance Facility comes into play. If the premium the insurance company would like to charge you exceeds the rate cap, or if they decide that they do not want to take you on for any other reason, the company will “cede” your policy to the Facility. Ceding the policy allows the company to offer you a policy without taking on your risk themselves; the Facility is the one that collects your premium, and the Facility is the one that will pay out any claims. Essentially, the insurance company will offer you an insurance policy on behalf of the Facility. Nearly every insurance company in the state contributes policies to the Facility, as the idea here is to share high-risk insureds between all carriers.

Lapse of Insurance

Like almost every other state, automobile insurance is mandatory in North Carolina, but unlike many other states, the consequences for failing to maintain insurance when required can be quite severe. Insurance companies are legally obligated to notify the state when you cancel the North Carolina Insurance on your vehicle, and if the state doesn’t receive notice that you have a new policy or that you’ve turned in your plates, you’ll be hearing from them. If you do let your auto insurance lapse, expect to see some potentially hefty fines—and if you don’t respond to their notice, it gets worse. If that happens, expect to have your license plates revoked for 30 days and also be required to obtain a special insurance certificate from your insurance company called an FS-1.

With the processes of North Carolina auto insurance being as unique as they are, and with the consequences being as severe as they are, it’s always a good idea to return any requested documents as quickly as possible. If you find yourself in any of the above situations, make sure to speak with your insurance agent regarding any questions you may have.