Difference in Conditions Coverage
Difference in conditions insurance, typically shortened to DIC, provides extended coverage for property owners. Generally, DIC coverage offers protection against significant natural disasters that are usually excluded from standard policies, like earthquakes, flood, landslides and mudslides. DIC is intended to supplement, not replace, standard property insurance.
FAQs
What does difference in conditions insurance cover?
- Earthquakes
- Standard property policies do not provide coverage for earth movement, including damages caused directly by an earthquake. Earthquake coverage can be available as a standalone policy or through DIC coverage.
- Floods
- Natural flooding is often excluded from standard property policies. Flood coverage can be purchased as a standalone policy but DIC policies can also cover this exposure.
- Landslides
- Both earthquake and standard property policies typically exclude landslides. Residents of areas at risk of landslides should consider investing in DIC coverage.
- Mudslides or mudflow
- This type of loss isn’t covered by standard property policies or flood policies. If you live in an area prone to mudslides, like the bottom of a slope or canyon, a DIC policy can help cover this common coverage gap.
All-risk vs named perils
DIC coverage can be written on an all-risk basis or on a named perils basis.
All-risk provides coverage for any cause of loss that isn’t specifically excluded. The term all-risk can be misleading since most all-risk policies still contain exclusions.
Named perils limits coverage to the perils specified in the policy (like landslide or flood).
Limits & deductibles
Limits vary from policy to policy. Some may have both a per occurrence and an aggregate limit, while others may only have an aggregate limit. Likewise, DIC can use actual cash value or replacement cost to value your business property. Usually, DIC policies have separate limits for separate causes of loss, like a $500,000 limit for flood and a $250,000 limit for landslide. Like other types of insurance, DIC coverage usually has a deductible. This deductible may be larger than those seen in standard property insurance because DIC deductibles are typically based on a percentage of the insured value. Deductibles can apply to each building, each location or all buildings and all locations.
Coinsurance
Coinsurance is a way for carriers to require that a certain percentage of a property’s value be insured to receive full claims coverage. The majority of DIC policies do not have a coinsurance clause. This allows policyholders to insure their property for less than its full value without a penalty but it also allows for carriers to cover property at less than its full value.
Example: In a mudslide prone area, a DIC carrier may only be willing to cover a building against mudslide loss at 50% of its replacement value.
Primary vs excess
DIC coverage can be written on either a primary or an excess basis.
Primary should be used when a business that has no other coverage for a certain type of loss (like a flood).
Excess should be used when a business already has some flood coverage elsewhere but wants to increase their flood limits.
Business income
Not every DIC policy will cover business income losses that are a result of a covered cause of loss. If experiencing a landslide, for example, would impact your ability to perform your normal business operations, exploring business income coverage would be a good idea.
Is difference in conditions coverage right for me?
If you own business property in an area that has a high risk for natural disasters of if your property has a significant exposure to a catastrophic event, you may want to consider DIC insurance. If your standard property carrier is not willing to cover a natural disaster you are exposed to or if the premium your standard carrier wants is too much, asking your agent about DIC is a smart decision. You may already have a standalone flood or earthquake policy but you can use a DIC to increase you coverage limits.