Difference In Conditions Policy
Written by Justin Goodman, CIC, CLCS, CISC, CEO and Co-Founder, Total CSR
Published: September 10, 2026 · Last reviewed: September 10, 2026
In plain language: A Difference In Conditions policy works alongside a client's regular property insurance to cover losses the main policy leaves out, most often flood and earthquake. It sits on top of the primary policy and pays when that policy's terms fall short.
Technical definition: A Difference In Conditions policy is a separate property insurance contract, usually written on a manuscript or specialty form, that provides excess or broadened coverage over a primary commercial property policy. It typically responds to perils, sublimits, or valuation gaps the underlying policy excludes or restricts, such as flood, earthquake, or foreign shipment values.
Difference In Conditions Policy at a Glance
| Attribute | Detail |
|---|---|
| Also known as | DIC policy, DIC coverage |
| Category | Commercial property coverage supplement |
| Lines of business | Commercial Property, Inland Marine, Excess and Surplus Lines |
| Industries most affected | Real estate, manufacturing, retail, hospitality, construction |
| Related forms or endorsements | Manuscript DIC forms; primary form typically ISO CP 00 10 |
| Who bears the risk | Property owner or business, absent a DIC policy, for excluded perils like flood or earthquake |
| Common solution | Standalone DIC policy layered over the primary commercial property policy |
| Also interacts with | Excess insurance, flood insurance, earthquake insurance, business income coverage |
Key Takeaways
- A Difference In Conditions policy is a supplemental property policy purchased to cover perils and gaps a client's primary commercial property policy does not address.
- Agencies use DIC policies to close catastrophe exposure gaps, most commonly flood and earthquake, without rewriting the entire primary property program.
- The most common misunderstanding is assuming a DIC policy duplicates the primary policy; instead it only responds where the primary policy's terms, conditions, or limits fall short.
- Agencies should map the primary policy's exclusions and sublimits line by line before placing a DIC policy, so the two policies interlock without creating a new gap between them.
What Is a Difference In Conditions Policy in Insurance?
A Difference In Conditions policy is a property insurance mechanism built to solve a structural problem: standard commercial property forms, including ISO's CP 00 10, exclude or sharply limit certain catastrophe perils like flood and earthquake, and even where they include them, sublimits are often far below the property's actual value. A DIC policy exists to close that gap by providing coverage that activates specifically where the primary policy's conditions, definitions, or limits leave the insured exposed.
The doctrine behind DIC coverage is layering, the same principle behind excess liability towers. Rather than replacing the primary policy, the DIC policy reads the primary policy's terms and fills the difference. Carriers writing DIC coverage build manuscript forms because no standard ISO form exists for this purpose; each DIC policy is drafted to match the specific primary policy it sits above.
Consider a manufacturing plant in California carrying a standard commercial property policy that excludes earthquake entirely and caps flood coverage at $100,000. The plant's replacement value is $20 million and it sits in a moderate flood zone. A DIC policy purchased alongside the primary policy would add earthquake coverage from the ground up and increase the flood sublimit to match the building's actual exposure, without touching the fire, wind, or theft coverage already working well under the primary form.
How Does a Difference In Conditions Policy Work?
- The gap analysis. An agent or broker reviews the primary commercial property policy and identifies excluded perils, low sublimits, or valuation shortfalls, most commonly around flood, earthquake, and named windstorm.
- The DIC placement. The agency approaches a specialty or excess and surplus lines carrier to write a manuscript DIC policy that specifically targets the identified gaps.
- The layering. The DIC policy is written to sit alongside or above the primary policy, referencing the primary policy's terms so the two do not overlap in a way that leaves a hole or creates double coverage.
- The loss. A covered event occurs, such as a flood, and the primary policy either denies the claim outright or pays only its sublimit.
- The DIC response. The DIC carrier pays the difference between what the primary policy covered and the insured's actual loss, up to the DIC policy's own limits.
Real Claim Examples Involving a Difference In Conditions Policy
Flood loss at a distribution warehouse
A logistics company's primary property policy included flood coverage but capped it at $250,000, far below the $3 million in inventory and racking damaged when a nearby river overflowed. The company had layered a DIC policy specifically for flood exposure at this location. The DIC carrier paid the remaining $2.75 million after the primary policy exhausted its sublimit, and the business avoided a devastating balance-sheet loss.
Earthquake damage to a multi-family property
A habitational property owner in a seismic zone carried a standard commercial property policy that excluded earthquake entirely, a common exclusion agents must flag at renewal. Following a moderate earthquake, structural cracking and a partial roof collapse caused $1.4 million in damage with no primary coverage available. Because the owner had placed a DIC policy specifically for earthquake, that policy responded in full, subject to its own deductible and limit.
Coverage gap missed on a manufacturing risk
A manufacturer assumed its DIC policy would cover business income losses the same way the primary policy did, but the DIC form only addressed physical damage from flood and earthquake, not time element coverage. After a flood shut the plant down for six weeks, the business income claim was denied under the DIC policy and only partially covered by the primary policy's limited flood sublimit. The gap surfaced because no one had compared the business income language across both policies at binding.
Difference In Conditions Policy vs. Excess Insurance: What Is the Difference?
A Difference In Conditions policy and a standard excess insurance policy both sit above a primary policy, but they solve different problems. Excess insurance generally extends limits for the same covered perils once the primary policy's limit is exhausted, while a DIC policy typically adds coverage for perils or conditions the primary policy does not cover at all.
| Comparison area | Difference In Conditions Policy | Excess Insurance |
|---|---|---|
| Primary use case | Filling peril or condition gaps, especially flood and earthquake | Extending limits above the primary policy for the same perils |
| Coverage / concept type | Broadened or different terms than the underlying policy | Same terms as underlying policy, higher limit |
| Typical exclusions | Perils not specifically added, such as named windstorm if not addressed | Perils already excluded by the underlying policy |
| Who is most affected by errors | Property owners with catastrophe exposure in flood or seismic zones | Businesses with high-value assets exceeding primary limits |
| Common mistakes | Assuming DIC duplicates primary coverage rather than filling a specific gap | Assuming excess automatically follows the same coverage grant as primary |
What Are the Most Common Mistakes With a Difference In Conditions Policy?
- Agencies sometimes bind a DIC policy without confirming it matches the primary policy's effective dates, creating a coverage gap during the mismatch period.
- Clients often assume the DIC policy duplicates all primary coverage, leading to confusion and underinsurance when a claim falls into neither policy.
- Producers frequently fail to compare business income and time element language between the primary and DIC policies, missing gaps like the one in the manufacturing example above.
- Agencies sometimes place a DIC policy for flood or earthquake but overlook other excluded perils, such as named windstorm or mine subsidence, that also need attention.
- Documentation errors occur when the DIC policy references an outdated version of the primary policy's terms after a midterm endorsement changes the primary coverage.
- Some agents treat DIC placement as a one-time task rather than reviewing it every renewal as property values and primary policy terms change.
How to Explain a Difference In Conditions Policy to a Client
Explaining a Difference In Conditions Policy to a personal lines client
Think of your homeowners policy and a flood or earthquake policy as two separate answers to two separate questions. Your homeowners policy answers "what happens if my house catches fire," and a Difference In Conditions type policy, often sold as standalone flood or earthquake insurance, answers "what happens if water or ground movement causes the damage instead." You need both because neither one covers everything on its own.
Explaining a Difference In Conditions Policy to a small business owner
Your commercial property policy covers most day-to-day risks like fire and theft, but it may exclude or sharply limit flood and earthquake damage. A Difference In Conditions policy is a second policy we place specifically to cover those gaps, so if a flood hits your building, you are not stuck with a $100,000 sublimit on a $2 million loss. We review this every year because your property values and the primary policy's terms both change.
Explaining a Difference In Conditions Policy to a CFO or risk manager
Your primary property program has structural exclusions and sublimits around catastrophe perils that create real balance-sheet exposure, particularly flood and earthquake. A Difference In Conditions policy is a manuscript excess layer we underwrite specifically to close those gaps, matched line by line against your primary form's definitions and exclusions. We recommend an annual gap analysis because a midterm change to your primary policy can silently break the alignment between the two layers.
Frequently Asked Questions About Difference In Conditions Policy
What does a Difference In Conditions policy actually cover?
A Difference In Conditions policy covers perils, conditions, or limit gaps that the primary commercial property policy excludes or restricts, most commonly flood and earthquake. The exact scope depends entirely on the manuscript form, since no standard ISO DIC form exists. Every DIC policy must be read against its specific companion primary policy to know what it actually adds.
Does every business need a Difference In Conditions policy?
Not every business needs one. Businesses located in flood zones, seismic regions, or those carrying primary policies with thin catastrophe sublimits relative to their property values are the most common candidates. A gap analysis comparing the primary policy's terms to the property's actual exposure determines whether a DIC policy is worth the additional premium.
Can a Difference In Conditions policy create a coverage gap instead of closing one?
Yes, if the DIC policy and primary policy are not carefully coordinated. Mismatched effective dates, inconsistent peril definitions, or differing business income triggers between the two policies can leave a loss that neither policy responds to. Agencies should review both forms side by side at every renewal, not just at initial placement.
Who typically writes Difference In Conditions policies?
Specialty and excess and surplus lines carriers typically write DIC policies because the coverage is manuscripted rather than built on a standard ISO form. Standard admitted market carriers rarely offer this product since it requires custom drafting against each client's specific primary policy.
How is a Difference In Conditions policy different from simply raising the primary policy's flood sublimit?
Raising the primary policy's flood sublimit, when the carrier allows it, keeps everything under one policy and one set of terms. A separate DIC policy is used when the primary carrier will not offer adequate limits or excludes the peril entirely, requiring a different carrier and a different, layered contract to fill the gap.
Related Insurance Terms
- Excess Insurance: A policy that provides additional limits above a primary policy for the same covered perils, distinct from a DIC policy's role of adding different coverage terms rather than just higher limits.
- Named Perils Policy: A policy that only covers losses from perils specifically listed in the contract, often the type of primary policy a DIC policy is layered above to add missing perils.
- All-Risk Policy: A property policy, more precisely called an open perils policy, that covers all causes of loss except those specifically excluded, which still often requires DIC coverage for flood or earthquake.
- Flood Insurance: Coverage for water damage from overflowing bodies of water or heavy rainfall, one of the two most common perils a Difference In Conditions policy is purchased to add.
- Earthquake Insurance: Coverage for seismic ground movement damage, the other primary peril driving most Difference In Conditions policy placements.
- Manuscript Policy: A custom-drafted insurance contract not built on a standard ISO form, the drafting approach used for virtually all Difference In Conditions policies since no standard DIC form exists.
About the Author
Justin Goodman, CIC, CCIP, CISC, CLCS, CRIS, PCIA, QCLS, MFHR CEO and Co-Founder, Total CSR, Inc.
Justin Goodman is a third-generation insurance broker with over two decades in agency operations. He has trained more than 100,000 CSRs, account managers, and producers in commercial and personal lines coverage, from workers' compensation to construction risk. He was named 2024 Insurance Journal Agent of the Year and one of the nation's top five construction insurance experts by Risk & Insurance. He is the author of Retain, which applies cognitive science research on memory and knowledge transfer to insurance training, and speaks nationally on how agencies build durable technical expertise in their teams.