More on Home Insurance
More on Home Insurance
Difference in conditions (DIC) insurance is designed to cover hazards that aren’t covered in a standard homeowners insurance policy.
Published November 10, 2020
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Homeowners insurance protects your property against covered perils, including fire, smoke, wind, hail, and theft. But losses caused by earthquakes, flooding, landslides, and mudslides are often excluded by homeowners insurance.
A difference in conditions (DIC) policy is commercial and residential property insurance that is designed to fill in the coverage gaps left by your main policy. Difference in conditions policies are normally provided by surplus lines carriers, which are insurance companies that aren’t licensed at the state level and generally take on higher risks than standard insurers. These carriers typically offer “all-in-one” coverage for earthquakes, flooding, landslides, and mudslides in a single DIC policy, according to the Insurance Information Institute.
Difference in conditions insurance is also common in high brush fire risk areas of California where wildfire damage is often excluded by homeowners insurance and where residents have a more difficult time obtaining insurance. Many California homeowners get windstorm and fire coverage through the California FAIR (Fair Access to Insurance Requirements) Plan and pair it with a DIC policy that covers water damage, theft, and liability losses.
Difference in conditions (DIC) insurance is intended to cover perils not covered by home insurance, like earthquakes, flooding, and landslides
DIC policies are typically offered by surplus carriers, which are insurers that specialize in covering homes in high risk areas
It’s common for California residents to pair their CA Fair Plan with a DIC policy
Difference in conditions insurance is a supplemental property insurance policy that covers damage and loss not covered by your standard homeowners insurance policy, such as earthquakes, flooding, mudflow, and landslides.
A DIC policy can function as primary or excess coverage. It’s a primary policy if the peril you’re insuring against isn’t already covered under another policy. It’s your excess policy if you’re already covered but only up to a limited amount. If your DIC policy acts as excess coverage, it would kick in once you’ve reached the coverage limits on your primary policy.
For example, say your home is damaged in a flood. You have a primary flood insurance policy for $250,000, plus a DIC policy for $1 million. Once your primary policy pays out the full amount of $250,000 for flood damage to your home, your DIC policy would kick in to cover the rest, up to $1 million.
Bear in mind that DIC policies are sold by surplus lines carriers that aren’t subject to the same underwriting and rating requirements as standard homeowners insurance companies. While the lack of regulation allows DIC insurers to take on more risk than regular carriers, policies are generally pricier and don’t provide the same comprehensive level of coverage.
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Difference in conditions insurance covers what your homeowners insurance policy doesn’t cover, including:
Earthquakes - Standard homeowners insurance doesn’t cover earth movement, including damage directly caused by earthquakes. Many surplus carriers cover direct earthquake loss in DIC policies
Flooding - Homeowners insurance covers internal water damage after a burst pipe or explosion, but won’t cover property loss as a result of flooding. Flood protection is a common inclusion in DIC policies
Mudslides - Homeowners insurance doesn’t cover mudslides, and it’s also possible your flood insurance policy doesn’t either. If you live in an area at risk of mudslides, like at the bottom of a slope or canyon, consider mudslide coverage via a difference in conditions policy
Landslides - Landslides are typically excluded by both home insurance and earthquake insurance, so homeowners in landslide hazard areas should consider a DIC policy with landslide coverage
Surplus carriers typically offer coverage for earthquakes, flooding, mudslides, and landslides in a single policy package. You likely only need DIC insurance if you are at risk of such hazards.
Since many major insurance companies in California are no longer insuring houses in fire-prone areas of the state, residents have turned to the California FAIR Plan, an insurance association implemented at the state level to provide insurance to homeowners that can’t get coverage on the private market.
Although the CA FAIR Plan is a fine last-resort option if you’re scrambling for coverage before wildfire season, the plan only covers losses related to fire, smoke, lightning, windstorms, explosions, and vandalism, but won’t cover water damage and theft. Additionally, FAIR Plan policies don’t include personal liability protection, a crucial component of a standard homeowners insurance policy.
To supplement that gap in coverage, it’s common for California residents to turn to a difference in conditions policy. Depending on the company and policy, a DIC policy may extend the coverage limits for certain perils in your FAIR Plan, broaden coverage to protect against water damage and theft loss, and add additional protection like liability coverage.
The California Department of Insurance provides a list of insurance companies that sell DIC policies here.
Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
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