Under new NC law, 'auto insurance premiums are going to go up'

RALEIGH, N.C. (WTVD) -- A couple of new North Carolina laws went into effect Wednesday and they could affect your wallet. An economist warned that savings from a personal income tax decrease could be short-lived.

Under a new law, the individual income tax rate will drop a quarter of a percent from 2024 and will now sit at 4.25%.

ABC11 asked NC State University economist Mike Walden to crunch the numbers. He estimated that a person making $50,000 a year could save $125 with the cut.

"It's part of a plan the General Assembly put into effect a couple years ago where they are gradually reducing the income tax rate," said Walden.

Some lawmakers have been moving toward eliminating the personal income tax. There has been debate about the issue and how it could affect North Carolina's economy.

Julien Fournier has been looking forward to the new income tax rate kicking in on New Year's Day. He and his girlfriend, Rachel Dash, relocated to Raleigh from Canada specifically to save money.

"It's more beneficial to have lower tax income," said Fournier.

Dash added, "I think a lot of people move here for the livability and affordability."

There will be more savings to come. Another reduction is planned for 2026 and it would be lowered to 3.99%.

Another law for 2025 raises the minimum liability limits for auto insurance to $50,000 for one person and $100,000 for two or more people per accident. Property damage coverage will also rise to $50,000.

"Auto insurance premiums are going to go up," said Walden. "I think the average household, whatever they would save on this income tax cut, would be more than counteracted by increases in insurance rates."

Lillionn Taylor is a student driver and told ABC11 that half of her paycheck goes toward paying for car insurance. There could be a greater financial squeeze under the new law.

"They increased it like crazy," said Taylor.

The law also changes how underinsured motorist coverage is calculated, ensuring that the total damages sustained by an individual are considered. These updates aim to provide better financial protection for drivers and accident victims.

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