"Auto insurance", also commonly referred to by terms such as "Vehicle insurance", "Car insurance" and "Motor insurance", stands for the insurance that is acquired for the licensed vehicles. Automobile insurance covers the losses incurred due to accidental damage to the vehicle.

Auto insurance covers some of the entities listed below:

> Insured vehicle: The vehicle for which the insurance has been obtained against any damage.

> Insured Party: The nominees who have been enlisted in the insurance application.

> Third party Vehicle: Other third party vehicle which has been damaged due to the negligence of the driver.

> Any accidental or intentional harm to the vehicle.

Once the auto insurance formalities are completed, the vehicle owner needs to pay the periodic premiums to be eligible to claim the insurance when required. The premium amount may be fixed or can be at the discretion of the insurance company to charge the premium, either way the government laid norms has to be followed while fixing the premium rates. These norms may vary depending on certain criteria such as the type of vehicle (car, two-wheelers, trucks etc), the purpose of the vehicles (for personal use, transportation of goods etc.), the insurer's details (age, gender, marital status, driving history etc), the coverage policy selected (deductible, limit etc.).

Out of the many coverage policies offered, the common ones are liability insurance coverage that covers all the members who are listed as policy holders in the event of damage to a life or property. These policies usually cannot be availed of if the holder is driving someone else's vehicle. As an alternative, people might go in for the Named Operators Policy which grants the insurance amount regardless of the ownership of the vehicle.

The law that governs automobile insurance differs from one country to another. In the United States, most of the states have made it mandatory for each vehicle owner to procure auto insurance that will pay for any liabilities and harm caused to his own or any other vehicle. The state of New Hampshire and Wisconsin do not require the driver to possess liability insurance. However, the same is obligatory in every other state in USA. The consequences of not owning auto insurance in states which follow "compulsory auto insurance" policy may lead to the vehicle owner being penalized or in worst circumstances his driving license can be revoked permanently. In certain dire situations, there is also a possibility of the driver being imprisoned. In spite of the laws being enforced stringently, no considerable fall in the number of uninsured vehicles has been observed. To ensure that the rules are followed by citizens, some states have come up with a proposal in which each insurer needs to maintain databases which are updated with the latest information about each motorist. This system will assist law enforcement officers keep track of motorists that have not insured their vehicles, and are found guilty of negligence. After all, insurance is what gives every auto owner a great sense of security and protection, so stringent laws are only there for a valid reason.