Definition - What does Policy mean?
A policy is a formal contract between an insurer and an insured that lays out the terms of the insurance coverage that the insurer provides to the insured. Policies are legally binding and have many details included in them that are relevant to the coverage. For example, an insurance policy will state the coverage period, the premium rate, any exclusions of coverage, and a number of other important details.
Insuranceopedia explains Policy
Policies can be extremely important in any situation where a lawsuit occurs regarding an insurance claim. The reason is because insurance policies are essentially business contracts. So if an insurer tries to avoid paying a covered claim to a policyholder and a lawsuit ensues as a result, the policy will be evaluated to see if the insurer really is obligated to pay the claim or not. Insurance companies often offer many different polices at different premium rates. Generally, the higher the premium, the more extensive the coverage is.