Auto insurance is implemented by a policyholder in agreement with the terms established by an insurance company.When you purchase a specific auto insurance policy, you are transferring certain risks to your well-being into the hands of an insurance company, in the form of a written agreement.The risks covered through auto insurance  could include economic losses from loss of income or bodily injury or property damage resulting from an accident.    
When you sign a contract for an auto insurance policy, the insurance company agrees to provide you with a shared liability for specific losses or risks mentioned in the policy contract. The insurance agreement mentions the coverage limits and indicates the dangers that may occur such as acts of terrorism and more. 

The auto insurance policyholder is protected, by that policy, from economic losses that occur due to auto theft or accidents and other unexpected events.