Content policies in AEM are template-level configurations for the template and its components. They define which components are available to a template or container and what styles or functions are available to a component.
Managing policies in Adobe Experience Manager (AEM) can be accomplished via code or the template UI. If policies are being managed via code and the code base was built off of the AEM Project Archetype, by default, the policies will all end up residing in a single .content.xml file.
Due to the amount of items that can be defined in policies, this .content.xml file can quickly grow and be difficult to manage and prone to merge conflicts.
The policy .content.xml file that the AEM Project Archetype generates defines the JCR nodes and properties of content under the polices node. Instead of defining all the JCR content in one file, this can easily be expanded to multiple files, creating a less error-prone, easier way to manage policies.
To do this, take the JCR structure defined in the policy .content.xml file and create folders and .content.xml files down to the component level. The goal is to take the default structure and convert it into manageable pieces.