Car insurance is effectively a contract between yourself and an insurance company in which you agree to pay premiums in exchange for protection against financial losses stemming from an accident or other damage to the vehicle. Auto insurance can offer coverage for: Vehicle damages, including your car or another driver's vehicle

Auto insurance pays for injuries or property damage after an accident, at least up to the policy’s limits. That financial protection is why insurance is usually required by state law in order to own or drive a car.