How a Difference in Conditions Policy Can Safeguard Your Assets

Property owners in high-risk areas may be able to purchase difference in conditions (DIC) insurance to supplement their commercial or homeowners insurance coverage. While a difference in conditions policy can be expensive, it may be the only way to insure your home against all of the damaging perils it is exposed to if there is a high degree of risk associated with covering your property.

Read below to learn more about difference in conditions insurance coverage, such as what your policy can cover and what types of insurance companies offer DIC coverage.

On This Page

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  What Is a Difference in Conditions Policy?

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  How Does a Difference in Conditions Policy Work?

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  What Does a Difference in Conditions Policy Cover?

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  What Are the Benefits of a DIC Insurance Policy?

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  How Much Does a DIC Insurance Policy Cost?

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  How To Get a Difference in Conditions Insurance Policy

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  FAQs

What Is a Difference in Conditions Policy?

DIC insurance is a type of property and casualty (P&C) coverage designed to fill in the gaps in an existing insurance policy. It may be available as a residential insurance policy for homeowners who need coverage for perils that aren’t covered by their home insurance or a commercial insurance policy for businesses that need higher coverage limits for select risks or coverage that can supplement an insurance policy underwritten by a carrier based in a different country.^[1][2]

Who Needs a DIC Policy?

While most homeowners shouldn’t need a residential DIC policy, this coverage type can be beneficial for high-risk homeowners living in areas with a high exposure to destructive perils that are excluded from their primary insurance coverage. In particular, DIC insurance is commonly recommended for Fair Access to Insurance Requirements (FAIR) Plan policyholders in California.^[3]

The California FAIR Plan is an insurance pool set up to provide fire coverage for homeowners in wildfire-prone areas who may otherwise struggle to find coverage on the private insurance market. Since the FAIR Plan only covers property damage caused by fires and similar perils, policyholders may need supplemental DIC insurance to acquire more complete protection that mimics a traditional homeowners insurance policy.

Is a DIC Policy Required?

You are not required by law to carry DIC insurance in any state. That said, mortgage lenders often require you to insure your home to protect their investment in your property.

As a result, if you are still paying off your house, it’s possible that your lender could require you to obtain coverage from a DIC insurer if you have a high risk of experiencing a loss that your homeowners insurance won’t cover.

How Does a Difference in Conditions Policy Work?

DIC insurance policies are typically underwritten by surplus lines insurance companies.^[4] Surplus lines insurers specialize in covering unique risks that aren’t covered by traditional insurance providers. However, you should note that surplus lines carriers are not licensed by state insurance departments, and they are not backed by guaranty associations, meaning you would have no protection if your insurer experiences financial difficulty and becomes unable to pay out claims.^[5]

What Does a Difference in Conditions Policy Cover?

Since the primary role of difference in conditions insurance is to account for coverage gaps in another insurance policy, you can often customize your DIC policy to match your specific coverage needs. For example, DIC coverage is the only type of property insurance that can broadly cover damage from landslides.^[4] Meanwhile, California FAIR Plan policyholders may be able to secure personal liability and additional living expense coverage through a DIC policy.^[3]

Other perils like these may also be included in the expanded coverage provided by a DIC insurance policy:^[1][4]

• Water damage
• Theft
• Tree root damage, collapse and other sudden sources of damage to service lines
• Weight of ice, sleet and snow
• Falling objects
• Earthquakes
• Mudflows
• Flooding

What Isn’t Covered?

Your DIC policy likely won’t cover preventable or gradual sources of damage, such as regular wear and tear, nor will it cover intentional losses or any other fraudulent activity. Beyond these, DIC insurance doesn’t have any universal exclusions since it exists to cover otherwise uninsurable losses, so the limitations of your DIC coverage will depend on the specific details of your policy.

What Are the Benefits of a DIC Insurance Policy?

The primary benefit of DIC insurance coverage is that it allows homeowners in high-risk areas to secure the same level of coverage as lower-risk property owners. It is particularly beneficial when it covers catastrophes that could destroy your home, such as floods and earthquakes, since you could have to pay the full cost of buying a new home after experiencing one of these perils if all you have is a standard homeowners insurance policy.

How Much Does a DIC Insurance Policy Cost?

DIC insurance premiums can vary depending on the perils your policy covers and your exposure to those perils, but in general, DIC policies tend to be expensive due to the fact that they predominantly cover high-risk properties. For example, the combined cost of California FAIR Plan coverage and a DIC policy was about $3,200 per year in 2022, which is more than double the cost of a standard home insurance policy in California as of January 2025.^[6][7]

How To Get a Difference in Conditions Insurance Policy

As you shop for difference in conditions coverage, it’s generally a good idea to compare quotes from three to five different insurance companies because insurers often have different underwriting methods that can lead to different rates for the same coverage. Of course, it may be time-consuming to hunt for insurance providers that offer DIC policies and give them all of the information they need to generate your quote.

That’s why you should let SmartFinancial help you throughout the comparison shopping process. Once you fill out an online questionnaire, we can connect you with an agent who can help you go over your insurance options and determine whether DIC coverage is necessary or a standard home insurance policy would be appropriate for your circumstances. Remember, comparing homeowners insurance quotes through SmartFinancial is free.