Auto Insurance was a result of new kinds of risks, to which human beings were exposed to after invention of Automobiles. in the later part of nineteenth century. There is no doubt that automobile brought drastic changes to life of people culturally and economically, but it also played role of a dangerous instrument resulting into death, personal injury and property damage. In addition to this there was always a chance of the automobile itself getting damaged or stolen.

Considering the potential losses associated with the Automobiles those can be really significant on occassions,and acting on the assumption that driving an automobile is a privilege and a not a right the policy makers required motorists to purchase auto insurance coverage to protect innocent third parties as well as the at-fault motorist from liability.

Auto Insurance as a result of above reasons is a compulsory insurance in most part of the world (for third party liabilities) ressulting into mazor premium income for insurers worldwide.

The history of Auto insurance gestures towards a complex interplay of financial responsibility laws, compulsory insurance laws, and uninsured motorist coverage based largely on the principles of tort law (Brainard 1961).

Auto Insurance in most basic form provides following coverages:

1. The Coverage against bodily injury liability from people you might injure in an accident involving your vehicle.

2. The coverage agaisnt property damage liability, which may arise as a result of damage to property damaged by  your vehicle like another car or some other property belonging to a third party..

3. Auto Insurance also provides coverage against medical payments to the policy owner and other passengers in the policy owner’s car

4. uninsured and underinsured motorist coverage under an Auto Insurance Policy  protects you when the negligent driver has no insurance or insufficient insurance (in most states, this covers only bodily injury losses -- though some states also include property damage losses)

5. Auto Insurance also covers physical damages sustained by your car. However the extent of coverage will depend upon the cover purchased by you.

a. Collision Cover, which covers losses to your car when you are involved in a collision

b. Comprehensive Cover, which covers most non-collision physical damage to your car (if your car is damaged in a storm, or a windshield breaks, for example).

 The premium that you need to pay for purchasing your auto insurance depends upon a number of factors. The list below is tentative and depending upon underwriting philosophy of the insurance companies more factors can be considered, or weightage of the factors may be varied.

• Age
  Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.
• Gender
  Women are statistically safer drivers, but that trend is changing as more female drivers get on the road.
• Marital Status
  A married person will pay less than a single person with an identical driving record.

You can think about these factors and determine what you can do to change them in your situation. You may be able to save on insurance based upon these decisions:

• Geography
  Where you live makes a difference. Folks living in areas with little or no traffic are likely to spend less on insurance than those living in congested cities or suburbs because areas with a lot of traffic tend to see more accidents. Some neighborhoods also have a higher rate of vehicle thefts, which can result in a higher premium.
• Driving Violations
  Having an accident or moving violations on your record (speeding tickets, DWI, reckless driving, etc.) put you at a higher risk for accidents and will likely mean a higher premium. Some insurance companies will penalize you for your record for as many as five years from when the incident occurred. However, keep in mind, as your record improves, your premium will get lower.
• Vehicle Type
  A cheap car will cost less to insure than that status symbol SUV sitting on 24" rims.
• Accident Claims
  A driving record that is clean and free of accidents will hold far better for you than lots of tickets and/or accidents.
• Credit Rating
  Many insurance companies view having a poor, or even no credit history as suggestive of higher risk and thus, charge you a higher premium. Monitor your credit rating free to see if you can get a better score. A better credit score will save on insurance premiums.
• Occupation
  Insurers have statistically found a correlation between your occupation and risk. For instance, a newspaper delivery person is most likely a higher risk than the personal banker sitting at their desk all day.
• Education
  A higher education can save on your premiums.
• Driving distance to work
• Miles driven each year
• Years of driving experience
• Business use of the vehicle
• Whether or not you currently have auto insurance and how high are your limits
• Theft protection devices (often results in discounts)
• Multiple cars and drivers (another opportunity for discounts)