insurance

Difference in Conditions

A type of insurance policy that fills gaps in coverage by providing protection for perils not covered by standard property insurance policies. It typically covers risks like flood, earthquake, or other catastrophic events excluded from basic commercial property policies.

Example

“The warehouse owner purchased difference in conditions insurance to cover flood damage, which was specifically excluded from their standard commercial property policy.”

Memory Tip

Think 'DIC = Filling the Ditch' - it covers the gaps (ditches) that standard policies leave uncovered.

Why It Matters

Standard property policies exclude many catastrophic risks, leaving businesses vulnerable to potentially devastating losses. DIC insurance provides affordable protection against low-frequency but high-severity events that could otherwise bankrupt a business.

Common Misconception

Business owners often believe their standard property insurance covers all possible risks, not realizing that flood, earthquake, and other catastrophic perils are typically excluded. They assume DIC insurance is unnecessary until facing an uncovered claim.

In Practice

A manufacturing facility worth $5 million has standard property insurance that excludes earthquake coverage. They purchase DIC insurance for $8,000 annually with a $100,000 deductible. When a 6.0 earthquake causes $800,000 in damage, their standard policy pays nothing, but the DIC policy covers $700,000 of the loss after the deductible.

Etymology

The term literally describes the 'difference in conditions' between what a standard policy covers and what additional protection is needed for specific risks.

Common Misspellings

difference in conditiondiference in conditionsdifference in condtionsdifferance in conditions

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