An insurance policy is a legal contract between a person, or a company, and the insurance company. The policy will clearly state what item it is insuring, what the terms of the insurance are, and the cost of the monthly or annual payment. For example, if you insure your car against accidents, then you will need to sign an insurance policy that details exactly what type of accident damage is covered, whether you are responsible for part payment of the damages, the cost of the monthly fee (premium) that has to be paid to the insurance company, who may legally drive the vehicle and so on. Each type of insurance will have its own insurance policy.