Car insurance is a contract between you and an insurance company. Here's how it works: You pay the insurance company money every month (or every six months) and the insurance company agrees to pay certain bills, up to a maximum amount, if you have an accident. The money you pay is called your premium.
A car insurance policy is a document that lists what the insurance company will pay for, how much they'll pay and what you have to pay yourself in the case of an accident or other damange to your car.