Guides
Difference in conditions (DIC) policies: what they cover and when to buy
A DIC policy sits beside your property cover and adds flood, earthquake and other excluded perils, usually from surplus lines insurers with big deductibles.
A difference in conditions (DIC) policy is a separate property policy, bought alongside your main commercial property coverage, that pays for perils the main policy excludes or caps, chiefly flood and earthquake. It is usually written on an all-risk basis by surplus lines insurers, with its own limits, large percentage deductibles and no coinsurance clause. It covers the "difference" between what your standard policy provides and what you need.
The term has other meanings. IRMI notes a DIC endorsement on a contractor's builders risk policy that fills gaps against an owner's program, and a foreign DIC policy that fills gaps in a multinational's locally issued policies. In directors and officers coverage, a Side A DIC policy is a different product; see D&O Sides A, B and C explained. This guide covers the property product.
Why a standard policy leaves the gap
The ISO special form, CP 10 30, excludes flood and surface water, earthquake and other earth movement, and sewer or drain backup. The main exclusions apply regardless of other causes that contribute to a loss, which is the anti-concurrent causation clauses: when one excluded cause sinks a claim problem. A policy can restore some of these perils by endorsement, but carriers often cap the limit, add a large deductible or decline the peril in high-hazard zones. A DIC policy fills those holes in two ways:
- Excluded perils. The DIC covers flood or earth movement that the underlying policy excludes. A loss the main policy excludes and the DIC does not is covered by the DIC.
- Capped perils. A DIC can add capacity above a low sublimit. Suppose the most your property carrier offers for flood is $250,000 but you need $2 million. A DIC can supply the other $1.75 million.
DIC can be named-perils or all-risk. Robert J. Prahl, CPCU, wrote in a 2012 *Adjusting Today* article from Adjusters International that DIC once served as a gap filler when property policies were named-peril, and that today it is bought mainly for flood and earthquake exposure, which is where most programs concentrate. Some DIC forms also carry an "all other perils" limit. See basic, broad and special causes of loss forms: what each covers for the named-peril versus open-peril structure.
What a DIC policy typically contains
Terms vary by insurer and program, and the policy language controls. These features are consistent in broker and adjuster commentary, including Prahl's article:
| Feature | Typical treatment |
|---|---|
| Basis | Separate policy or endorsement written alongside the property policy |
| Perils | Flood, earthquake and earth movement, often earthquake sprinkler leakage; sometimes named windstorm or all other perils |
| Deductible | Large, usually separate for flood and earthquake; often a percentage of values at each location, with a dollar minimum |
| Coinsurance | Generally none, because full limits for these perils may not be available |
| Market | Usually surplus lines; DIC is a non-filed class of inland marine insurance in most states, so rates and forms are negotiable |
| Limits | Often layered or shared among several insurers because catastrophe limits exceed what one insurer will write |
| Flood | In high-risk zones, often written excess of the National Flood Insurance Program (NFIP) limits |
On deductibles, Prahl's article reported that earthquake deductibles are typically 2% to 5% of property value, may carry a dollar minimum, and are better for the insured when applied per building or unit than when applied to total values at all locations. If more than one deductible applies to a loss, most policies apply only the highest. A market report from CRC Group, summarized by Artemis in April 2026, put typical earthquake deductibles at about 5% in California, about 3% in the Pacific Northwest and about 2% in the New Madrid zone. One managing underwriter's January 2026 DIC program sheet, from JEM Underwriting Managers, a Ryan Specialty subsidiary, shows minimum earthquake deductibles of 5% in California and 2% elsewhere and a minimum flood deductible of $100,000. That is one program, not a market standard. See Ryan Specialty and CRC Group for the wholesale brokers behind these numbers.
Flood, the NFIP and lenders
The NFIP caps coverage on a non-residential building at $500,000 and on contents at $500,000 (FEMA, floodsmart.gov). A building worth more needs excess flood, which often comes from a DIC. A DIC for a building in a high-risk flood zone often applies only above the NFIP limits, so the insured must buy the NFIP policy first. Ask whether the DIC deducts the NFIP limit whether or not you bought it. If it does, a building with no NFIP policy carries a $500,000 hole on top of the DIC deductible.
Lenders add a requirement. Under the Flood Disaster Protection Act, a regulated lender must require flood insurance on a building in a special flood hazard area, in an amount equal to the lowest of the outstanding loan balance, the maximum NFIP coverage available and the building's insurable value, as the Federal Reserve System's Consumer Compliance Outlook explained in 2022. Lenders can ask for more. See Commercial flood insurance: NFIP limits and private options for NFIP mechanics and NFIP reauthorization and what it means for business flood cover for the program's authorization status.
Earth movement is broader than earthquake
A DIC form usually defines earth movement more widely than the property form's earthquake endorsement does. One program describes broad earth movement as including earthquake, landslide, subsidence, mudslide, sinkhole loss, catastrophic ground cover collapse and volcanic eruption. Another form might name only some of those. Because definitions of flood and earthquake vary between DIC forms, put the DIC and the underlying policy side by side and find the loss that falls between them. earthquake insurance for businesses: coverage, deductibles, limits covers the endorsement alternative.
A hypothetical example
Say a landlord owns four office buildings in California with total insured value of $60 million. Its package policy excludes earthquake, so it buys a DIC with a $20 million earthquake limit and a 5% deductible applied per location. The largest building is valued at $18 million.
| Item | Amount |
|---|---|
| Earthquake deductible on the $18 million building (5%) | $900,000 |
| Earthquake damage to that building | $3,400,000 |
| Paid by the DIC | $2,500,000 |
| Retained by the landlord | $900,000 |
The deductible is a percentage of values at the location, not of the loss, so the landlord pays $900,000 whether the damage is $1 million or $10 million. If the deductible applied to the entire $60 million schedule, it would be $3 million, which is why the basis in the policy matters more than the rate. All figures are invented to show the mechanics. Fire following an earthquake is normally paid by the underlying policy, and a joint-loss agreement that is substantially the same in both policies helps settle which policy pays what, as Prahl advised.
Why DIC is a surplus lines product
DIC is written mostly by non-admitted insurers, so it follows surplus lines rules. A licensed surplus lines broker places it after a diligent search of the admitted market, state surplus lines tax and filing rules apply, and the insurer is not backed by the state guaranty fund. Those features are in excess and surplus lines insurance explained and admitted vs non-admitted insurers: what the difference means. The tax rate and filing details differ by state; see surplus lines taxes, stamping fees and diligent search and the workers' comp and benefits requirements by state.
What drives price and availability
DIC is priced from catastrophe models, so the quality of your data matters. The underwriter looks at location, construction, year built, number of stories, occupancy, flood zone and elevation, and total insured value at each address. The statement of values is the document that carries it; see the statement of values: what property underwriters need. Capacity also moves with the reinsurance market. Artemis reported in April 2026, summarizing the CRC Group report, that rate decreases of 20% to 30% were becoming common in the E&S catastrophe wind market and that capacity was at historic highs, and that managing general agents supply most deployable earthquake capacity. A softening market helps the buyer, but it turns quickly after a major loss.
Questions to ask before buying
- Which perils does the DIC cover, and how does it define flood and earth movement?
- What is the deductible, what is it measured against, and is there a dollar minimum?
- Does the policy sit excess of the NFIP, and does it assume you carry the full NFIP limit?
- Is there a coinsurance clause, a sublimit for business income or extra expense, or a limit on outdoor property?
- Do the DIC and the underlying policy share a joint-loss provision?
- Does the lender's loan agreement require a minimum limit or specific wording?
Key takeaways
- A DIC policy is a separate surplus lines property policy that covers perils your main policy excludes or caps, mainly flood and earthquake.
- Deductibles are a percentage of values at each location, typically 2% to 5% for earthquake, and the way they are measured can change what you retain by millions.
- Flood limits in high-risk zones usually sit above NFIP limits, which cap non-residential buildings at $500,000.
- Compare the DIC and the underlying policy side by side so no loss falls between them, and request a joint-loss provision.
- Accurate values and building data on the statement of values drive both availability and price.