What Is an Annual Policy?

An annual policy is a legal contract that exists between a policy holder and some entity, such as an insurance provider. Under the terms of an agreement, a policy holder remains covered for the risks outlined in the policy for one year. In the event that payments are missed or the policy holder's behavior violates the contract, the terms of the agreement could be changed or altogether canceled.

A frequent traveler might invest in a travel annual policy. These are package deals that provide coverage to a traveler over a one-year period and often for an unlimited number of trips. Other limitations may apply, however, such as restrictions surrounding the number of days over which a trip may transpire.

The insured become covered for certain risks that are associated with traveling. Some of those parameters may include coverage for medical attention, emergency situations where safety is compromised, and travel delays that lead an individual to obtain new accommodations. A travel annual policy would certainly be useful in the event that an airline loses a passenger's luggage or if flights are canceled altogether. Depending the scope of coverage selected, a frequent traveler could also become insured for potential auto accidents with a rental vehicle during the year.

A licensed driver can purchase an annual policy for auto insurance. Not all carriers might offer a yearly product as many auto insurance policies tend to be sold as shorter contracts. A benefit to the insured is the potential stability in the price for the annual policy, but it is possible that an annual contract must be paid up front without an option for monthly installments.

Life insurance is designed to remain active until the death of the policy holder. Providers do recommend, however, that annual policy checkups occur. To accomplish this, the policy holder updates any significant changes that might warrant revisions to the details of the policy. Life changes such as a different marital status, number of dependents, or the introduction of any new legal documents, such as a last will and testament, that include beneficiaries are cause to consider revising a life insurance policy.

Small business owners might also consider implementing an annual policy within an organization to update insurance contracts. Any factors that might cause an organization to require additional or potentially less coverage should be considered. For instance, if a company operates a fleet of vehicles and there is a change to the number of automobiles that are driven, an auto insurance policy may need to be updated.