What Is a DIC Policy and What Does It Cover?

Standard insurance policies often contain limitations. A Difference in Conditions (DIC) policy offers a specialized form of property insurance designed to provide expanded coverage. It acts as a targeted solution for risks that fall outside the scope of typical property insurance agreements. Understanding this unique product is important for individuals and businesses seeking more comprehensive protection for their property.

Defining a DIC Policy

A Difference in Conditions (DIC) policy is a specialized insurance contract that addresses coverage gaps in standard property insurance. The term “Difference in Conditions” highlights its primary function: to cover perils and conditions that differ from, or are excluded by, conventional policies. It serves as a supplementary coverage, not a replacement for, existing property insurance.

This type of policy is structured to fill specific voids, acting as a “gap-filler” for risks that standard insurers are often unwilling to underwrite due to their catastrophic nature or unpredictability. While standard policies typically cover higher frequency, lower severity perils, DIC insurance steps in for less common but potentially devastating events. It is commonly purchased in addition to a primary property insurance policy, extending protection for significant losses.

Perils Covered by DIC

DIC policies cover perils commonly excluded from standard property insurance. These often include catastrophic natural disasters such as flood, earthquake, landslide, and mudslide. Standard policies generally exclude these events because of their widespread and severe potential for damage, making them difficult for insurers to assess and price within typical frameworks.

Damage from natural flooding is almost universally excluded from standard property policies, while earthquake damage is also typically not covered. DIC coverage extends to structural damage, foundation issues, and other losses caused by seismic activity or water inundation. Beyond these major natural events, DIC policies can also be tailored to include other risks like water damage not associated with flood, theft, or even business interruption losses stemming from a covered catastrophic event.

Standard Exclusions in DIC Policies

While DIC policies broaden coverage, they also contain their own set of exclusions. These policies are not all-encompassing and typically do not cover perils that are already addressed or could be covered by a standard property policy. This prevents overlapping coverage and ensures the DIC policy acts as a specific gap-filler.

Common exclusions include losses due to war, nuclear hazard, governmental action, or intentional acts by the insured. Gradual damage from wear and tear, inherent vice, or certain types of pollution are also excluded. The specific terms and exclusions can vary depending on the policy and the insurer.

The Role of DIC in an Insurance Portfolio

A DIC policy plays a complementary role within an insurance portfolio, enhancing the protection offered by standard property insurance. It works in conjunction with existing policies, providing a robust risk management strategy. This is important when standard coverage leaves specific gaps.

For example, if a standard commercial property policy covers fire damage but an earthquake destroys the property, the DIC policy would respond to the earthquake loss. A DIC policy can also provide excess coverage, extending limits beyond what a primary policy offers for certain perils.