How Difference in Conditions Policies Work for Homeowners Insurance

Homeowners insurance doesn’t typically cover water damage from leaky pipes, for example. However, you could add a difference in conditions endorsement to your policy to cover this damage.

Keep reading to find out everything you need to know about differences in conditions policies and whether or not they’re worth it.

Difference in Conditions Policies Cover Incidents Homeowners Insurance Does Not Cover

A difference in conditions policy, also known as a DIC policy, is additional insurance coverage you can purchase to cover additional perils.

Some companies refer to differences in conditions coverage as “gap filler” coverage. It fills the “gaps” in a standard homeowners insurance policy or commercial policy.

A standard homeowners insurance policy covers a standard range of perils, including things like fire damage and windstorm damage.

However, homeowners insurance policies have many exclusions. A standard homeowners insurance policy doesn’t cover flood damage, for example. Many insurers don’t cover hurricane damage, earthquake damage, or wildfire damage if you live in an area prone to these disasters.

To cover these exclusions, you may want to add a “difference in conditions” endorsement to your policy. With this endorsement, your homeowners insurance policy covers additional items that would not normally be covered.

What Does Difference in Conditions Insurance Cover?

The primary goal of difference in conditions coverage is to cover things homeowners insurance does not cover.

Different insurers cover different things with differences in conditions coverage. Insurers also exclude different damages in different regions. You may not have windstorm coverage in the coastal southeastern United States, for example, or earthquake coverage in California without adding an endorsement to your policy.

Some of the common things covered by difference in conditions insurance for homeowners include:

• Floods
• Earthquakes
• Other severe losses and catastrophes typically excluded by a homeowners insurance policy

Do I Need Difference in Conditions Insurance?

The average person doesn’t carry a difference in conditions insurance, and most homeowners don’t have it.

However, DIC coverage could be the right choice for you, depending on your situation.

If you’re nervous about gaps in your existing homeowners insurance policy, for example, then you may want to consider DIC coverage. DIC coverage can fill these gaps, providing you with greater protection.

However, if you’re concerned about a single peril – like earthquakes or flooding – then DIC coverage may not be the right choice. In this case, you may be better off buying flood insurance or earthquake insurance to cover this specific peril.

If You Have FAIR Insurance, then DIC Coverage Could Be the Right Choice

If you have insurance through your state’s Fair Access to Insurance Requirements (FAIR) system, then DIC coverage could be the right choice for you.

Although most homeowners don’t have DIC coverage, many homeowners with FAIR insurance do have DIC coverage to fill gaps.

Here’s why DIC coverage may make sense for those carrying FAIR insurance plans:

• Some states provide insurance coverage for natural disasters as a last resort through the FAIR insurance system.
• FAIR insurance can cover wildfires, windstorms, hurricanes, earthquakes, and other issues in disaster-prone areas – including disasters ordinary insurers don’t want to cover.
• FAIR policies can protect your property, but they also leave gaps. They don’t cover theft, liability, or other types of losses beyond what’s listed on the FAIR coverage, for example.
• Because of these exclusions, many homeowners with FAIR plans buy difference in conditions (DIC) coverage, filling these gaps.
• By combining a FAIR plan with DIC coverage, you’re protected against major natural disasters while also getting coverage for water damage, theft, and liability, making the plan similar to a HO-3 or HO-5 home insurance policy overall.

DIC Coverage May Have Higher Limits than Earthquake or Flood Insurance

Difference in conditions (DIC) coverage may be the right choice even if you already have a homeowners insurance policy with flood insurance or earthquake coverage.

DIC coverage has higher limits for these perils than a conventional policy, which could provide you with greater protection after a loss.

Some of the areas where DIC coverage may be worth purchasing include:

• You have insurance through the National Flood Insurance Program (NFIP, but it only covers $500,000 in damage to your property. You buy DIC coverage to raise these limits and cover the full value of your property.
• Your commercial policy may only offer $250,000 in earthquake coverage, but you want extra protection because you live in an earthquake-prone area. You buy DIC coverage to raise these limits and protect your property.

Difference in Conditions Coverage is Popular in Commercial Insurance

Most of this article is written for homeowners – not business owners.

Homeowners can buy difference in conditions coverage. However, it’s more commonly found on commercial insurance plans.

Businesses with commercial properties or diverse interests, for example, are more likely to benefit from a DIC policy than a homeowner covering a single home.

If you have diverse interests in multiple geographic locations, for example, then DIC coverage can cover all of these interests. A single endorsement can provide greater protection for your businesses, property, and assets.

DIC coverage also covers unique things that ordinary commercial insurance doesn’t cover, including:

Property in transit coverage
Business interruption claims stemming from transit losses
Property at overseas locations (a typical commercial insurance policy in the United States may only cover property in the United States, US territory, and Canada, for example)
All other perils (AOP) coverage

Which Insurers Offer DIC Insurance?

Some of the country’s largest insurers offer DIC insurance, including:

• AIG
• CSAA
• Farmers
• Liberty Mutual
• Mercury
• Nationwide
• Safeco
• State Farm
• Travelers

Final Word

Difference in conditions (DIC) coverage is popular in the commercial insurance world, but it’s also becoming increasingly popular with homeowners looking to fill gaps.

With DIC coverage, you’re buying additional protection against natural disasters that would normally be excluded by your homeowners insurance policy – like wildfires and flood damage.

DIC coverage could be the right choice for commercial insurance policyholders with diverse interests. Or, it could be the right choice for homeowners with FAIR insurance policies who want to close gaps.

Contact your insurance broker, agent, or company to determine if difference in conditions coverage is the right choice for you.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.