Auto insurance is a contract between an individual and an insurance company that stipulates that as longs as a monthly premium is paid, the insurance company will pay for car-related losses throughout the term of the policy. Some states require that all drivers carry auto insurance in order to drive legally, other states do not.

However, even in states where auto insurance is not required, all drivers are required by law to pay for damage they cause as a result of an automobile accident. Without auto insurance, you run the risk of being financially responsible for the harm you cause individuals and property, and the cost of repairing or replacing your car if it is damaged or stolen.