What is a Condition? - Insurance Navy. In insurance, a condition is a specific term, rule, or stipulation in insurance policies. Insurance companies use policy conditions to outline the obligations and responsibilities of the insured party (policyholder) and the insurance carrier. These conditions must be met for the insurance contract to remain in force and for the insurer to provide the coverage outlined in the policy. The conditions of the policy agreement can be general or specific. General conditions apply to the entire policy, while specific conditions apply to only certain sections. If a policyholder fails to meet these conditions, the insurer may have the right to deny a claim or cancel the policy.