Difference in Conditions (DIC) Policy
A property insurance policy that fills gaps between a primary property policy and broader coverage requirements, often including earthquake and flood.
What It Is
A Difference in Conditions (DIC) Policy is a property insurance policy designed to fill the gaps between a standard property policy and the broader coverage the insured needs. DIC policies are most commonly used to provide earthquake and flood coverage that is excluded from standard commercial property forms.
Beyond earthquake and flood, DIC policies can cover other perils excluded from the underlying property policy, provide broader coverage terms, or eliminate restrictive conditions (like vacancy clauses or protective safeguards requirements) found in the primary policy.
DIC policies are typically written by specialty or surplus lines carriers and are structured to respond to losses that the underlying property policy does not cover. They 'drop down' to provide coverage when the primary policy has an exclusion or limitation that applies.
Why It Matters for Brokers
For brokers managing real estate, manufacturing, or any property-heavy account, DIC policies are essential tools for providing comprehensive property protection. Standard property policies exclude earthquake and flood in most areas, and contractual requirements (especially from lenders) often mandate this coverage. Brokers who understand DIC policy structures can create property programs that eliminate coverage gaps without duplicating coverage that already exists in the primary policy.
Real-World Example
A commercial property owner in Northern California has a standard property policy that excludes earthquake. The building is valued at $8M and the lender requires earthquake coverage. The broker places a DIC policy that provides $8M in earthquake coverage with a 10% deductible, plus broader all-risk coverage that fills gaps in the primary policy's basic form coverage. The DIC premium of $12,000 provides the lender with the required coverage proof.
Common Mistakes
- 1Not coordinating the DIC policy terms with the underlying property policy, creating potential overlap or gaps between the two policies.
- 2Failing to verify that the DIC policy's earthquake or flood sublimits meet lender requirements.
- 3Overlooking the DIC policy deductible structure, which may differ significantly from the primary policy's deductible.
How brokerageaudit.com Handles This
Policy Checker compares DIC policy terms against the underlying property policy to identify coordination issues, verify gap coverage applies as intended, and ensure lender requirements are met.