The major but not defining difference would be that with a long term insurance policy, one takes a policy whose term is more than one year. This will mainly be in life insurance policies that are intended to protect dependants in case of untimely death of the bread winner, investment or saving. Long term policies provide payment in case of death or maturity. Short term insurance are policies that run for a period of one year. They are referred as general insurance and is aimed at indemnifying the policyholder in case they suffer a financial loss during the term of the policy.