What Is Difference in Conditions (DIC) Insurance?

Difference in conditions (DIC) insurance is a type of policy that provides expanded coverage for some perils not covered by standard insurance policies. DIC insurance is designed to fill in gaps in insurance coverage and is most frequently used by larger organizations, looking for protection from catastrophic perils.

Key Takeaways

  • DIC insurance is not typically held by the average person.
  • This type of insurance is meant to protect the purchaser from risk outside the scope of normal insurance coverage.
  • DIC is flexible and can change based on factors such as equipment, risk of activity, age, and many other factors.
  • If you discuss DIC insurance with your primary broker, they are usually able to offer you DIC insurance at a discount vs. if you were to purchase it outright from another company.

Understanding Difference In Conditions (DIC) Insurance

Difference in conditions insurance provides expanded coverage for perils not covered by standard insurance policies. Insurance companies typically offer policies that cover perils that are well-defined and predictable.

They are less willing to underwrite policies that cover infrequent and severe perils, as these are more difficult to account when setting the premium that should be charged. Thus, most policies cover higher frequency, lower severity perils. However, this does not mean that the insured party is fully insulated from risks of catastrophes. It does mean that many insurers shy away from providing coverage for catastrophes.

DIC insurance is designed to increase coverage for perils that can result in severe losses, such as floods, earthquakes, and other catastrophes. As a gap-filler form of insurance, DIC insurance is designed to provide coverage that the broader insurance market won't provide. This type of coverage goes beyond the purchase of additional coverage limits since standard coverage typically excludes certain perils. The insured purchases this coverage in addition to a standard insurance policy, though some standard policies allow the purchase of a policy endorsement that may provide for much of the same needs.

To determine if you need DIC insurance, the best course of action is to review your situation with your agent or broker, who will look at your current policy levels and determine whether they are satisfactory for your insurance needs. DIC insurance isn't like auto insurance, where everyone needs to have it. DIC policies are fluid, with the ability to change them and to tailor-make them. If, for example, you need more coverage for property out in the open, for spoilage, for flood or earthquake, than your primary carrier is able to cover, then DIC might be an answer.

Difference in Conditions Insurance in Action

An example of a company that might buy a DIC insurance policy would be a firm with a property insurance policy that excludes flood coverage. They may purchase DIC insurance that specifically covers floods. Similarly, a construction company may purchase DIC insurance to bridge the coverage gap between a contractor’s policy and its policy. In some cases, multinational firms will purchase DIC insurance to fill in coverage gaps between their master policies and local policies.