When Did Car Insurance Become Mandatory in North Carolina?

North Carolina with blue backgroundDue to the large number of uninsured automobiles in the Tar Heel State, North Carolina adopted a compulsory insurance law known as the Vehicle Financial Responsibility Act of 1957. The state was one of the first to enforce such a law which requires that all registered motor vehicles be covered by an automobile liability policy continuously until registration is terminated.

Automobile policies must be issued by a company that is licensed to issue North Carolina auto insurance coverage and must consist of liability limits of no less than $30,000 for bodily injury to one person, $60,000 for bodily injury to two or more people and $25,000 for property damage. The law was developed to ensure that compensation was in place if a policyholder was to cause bodily injury and/or property damage to another party.

The state takes Financial Responsibility very seriously and failure to comply can result in fees and the revocation of a vehicle's license plates. Insurers are required by law to notify the Division of Motor Vehicles (DMV) in the event that a car insurance policy has lapsed. Once the DMV has been notified of a lapse in automobile coverage the vehicle owner will be sent a Form FS 5-7. This notice will request the necessary information to avoid the revocation of a license plate and the requested information will need to be provided within 10 days from the date on the FS 5-7 Notice.

Failure to provide the necessary information requested by the DMV may lead to the revocation of vehicle license plates for 30 days. in order to have an automobile relicensed a civil penalty fee would need to be paid and a proof of insurance Form FS-1 would need to be provided. The civil penalty can be in the amount of $50 for a first lapse, $100 for a second and $150 for subsequent lapses within a 3 year period. A service fee of $50 may also need to be paid if a license plate pick-up order has been issued, but can be avoided by surrendering the license plate to the DMV 10 days following the notice of revocation; additional licensing fees may also be applicable.

The civil penalties of $50, $100 and $150 may also apply to drivers that fail to correctly cancel policies or switch carriers. Motorists who wish to cancel car insurance coverage must surrender the vehicle license plate to the DMV prior to canceling the policy. Those who are switching insurers must make sure to purchase the new policy prior to canceling the old policy to avoid any fees and have the new carrier notify the DMV that the switch has been made without a lapse.


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