@Mike, Thanks for posting in Q&A. Yes, you understand is correct. To apply Intune policy, the user needs Intune license to be assigned. If the user is without Intune license, it can get not applicable status.
Please assign Intune license to the user you want to get this policy. Or if this is a shared device, you can also consider device license.
https://learn.microsoft.com/en-us/mem/intune/fundamentals/licenses
Hope the above information can help.
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