Difference in Conditions Policy: A Complete Guide for Independent Agents

If you’re an independent insurance agent working in today’s hard market, you already know the frustration. Standard carriers are tightening underwriting. Risks in wildfire zones, flood plains, coastal areas, and earthquake-prone regions are being declined or non-renewed. Clients come to you ready to buy, only to be told their property is “uninsurable” in the admitted market.

Escrows stall. Lenders push back. Clients lose confidence. This is where a difference in conditions policy becomes one of the most valuable tools in your toolkit.

Difference in Conditions (DIC) insurance is not a replacement for a standard property policy or a FAIR Plan. Instead, it is a standalone property insurance policy designed to address specific coverage gaps – most often exclusions for catastrophic perils such as earthquake or flood. 

When placed correctly, a DIC policy allows agents to solve real coverage problems, satisfy lender requirements, and keep deals moving forward.

This guide will help independent agents understand how DIC insurance policies work, when to recommend them, how to explain clearly to clients, and how agents typically access markets that write this coverage.

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What Is a Difference in Conditions Policy?

A difference in conditions policy is a standalone property insurance policy purchased to insure perils that are excluded or limited by another property policy. That primary policy may be a standard admitted homeowners or commercial property policy, or it may be a state-run FAIR Plan.

The key point for agents is this: A DIC policy responds according to its own policy form. Coverage is not automatic, not form-following, and not guaranteed simply because a primary policy exists.

In practice, DIC insurance is most often used as a gap-filler – addressing specific risks that would otherwise leave the insured exposed to severe financial loss. 

Many DIC policies are written on a special form or all-risk basis, subject to exclusions, while some may be more limited depending on the market and the specific risk. This contrasts with named-peril coverage, where only the listed causes of loss are insured.

For agents, DIC policies are most commonly placed when:

• A primary policy excludes catastrophic risks
• A FAIR Plan provides only minimal named-peril protection
• The client’s Total Insurable Value (TIV) exceeds what state programs will offer
• Lenders require broader protection than the primary policy provides

Note: DIC insurance doesn’t replace the primary policy. It complements it by addressing defined coverage gaps – nothing more, nothing less.

What Does Difference in Conditions Insurance Cover?

DIC insurance exists because many standard property policies exclude or severely limit certain high-severity, catastrophic risks. Here are various common perils that typically drive the need for DIC.

• Earthquake: Most homeowners and commercial property policies exclude earthquake insurance. In seismic zones, this exclusion represents one of the largest uncovered catastrophic risks. DIC policies frequently include earthquake coverage, often subject to percentage deductibles based on TIV.
• Flood: Flood is another standard exclusion under most property policies. While flood insurance is commonly associated with the National Flood Insurance Program (NFIP), private DIC policies may also provide flood coverage, sometimes with broader terms or higher limits than government programs.
• Landslide and Mudflow: These perils are often excluded or ambiguously treated under standard policies, particularly when related to earth movement or water events. In wildfire-affected areas, post-fire mudflow and landslide risk is a growing concern that DIC policies are specifically designed to address.

A Note on Wind Coverage

In many cases, wind is already covered under the primary property policy or a FAIR Plan. However, in certain coastal or high-risk areas, wind may be excluded or sub-limited, creating a potential role for DIC insurance. The key is always to review the primary exclusions first.

The following table offers a quick overview of what each type of policy typically covers. Actual coverage varies by state, carrier, and policy form, so always review the specific policy language and endorsements.

Note: DIC coverage is often structured by peril. Flood and earthquake are usually written under separate DIC policies or endorsements and are not automatically included under a single DIC policy.

Who Needs Difference in Condition Coverage?

Difference in Conditions coverage is for clients whose standard property insurance has limits. Often, these clients are not high risk by choice. Instead, their location and exposure create the need for extra coverage.

• Clients in High-Risk Areas: Clients in high-risk areas are the most common candidates.. For example, many California properties rely on the California FAIR Plan due to wildfire exposure. The California FAIR Plan is a named-peril policy that generally covers specific causes of loss such as fire, lightning, internal explosion, and smoke, with certain optional coverages available by endorsement. However, it may still leave gaps for other risks. Florida properties face similar challenges with flood exposure, and coastal areas often encounter exclusions or limitations for wind or water damage. In these cases, a DIC policy helps fill the gaps left by standard policies.
• High-net-worth clients: High-net-worth clients often need higher coverage limits than state-run insurance pools offer. Large homes, custom designs, and special materials can make replacement costs much higher. A DIC policy matches coverage to the real value of the property.
• Commercial clients: For commercial clients, the issue often extends beyond physical damage. Natural disasters can disrupt operations, supply chains, and revenue streams. Some DIC policies may include business interruption coverage tied to otherwise ‘excluded perils’, making them a critical part of commercial risk management.

Consider the example to understand why DIC coverage is needed. A homebuyer enters escrow with a FAIR Plan policy. The lender checks the file and notices missing flood or earthquake coverage. 

As a result, the loan process stops because the lender’s requirements call for broader protection. A DIC policy fills this gap, so escrow can close without changing the master policy.

Difference in Conditions vs. Other Property Coverages: Knowing the Difference

Clients often mix up Difference in Conditions (DIC) insurance with other types. This confusion can leave them with coverage gaps and unclear expectations about what their policies actually protect.

DIC insurance provides extra coverage for physical damage. It fills in the gaps left by named-peril policies, state FAIR plans, or limited standard coverage. This can include perils such as earthquake, flood, and, in some cases, theft that may be excluded or limited under the primary policy.

Flood insurance from the NFIP is a separate policy that only covers flood damage and has strict limits. In comparison, private DIC placements may offer flood or earthquake coverage through separate policies or structured solutions, depending on the carrier and risk. This flexibility can make DIC a broader and more flexible option for agents.

To clear up confusion, start with a simple comparison. If a client assumes their standard homeowners policy, such as an HO-3, already covers all property risks, explain that these policies often exclude or limit certain perils. This helps guide the conversation toward the need for additional property coverage where gaps exist.

It also helps to compare DIC with other property products. FAIR Plans are named-peril policies that typically cover fire-related perils such as fire, lightning, internal explosion, and smoke. Named-peril policies provide coverage for specified causes of loss but often exclude certain severe or catastrophic perils, such as flood or earthquake. DIC policies are designed to fill these gaps without altering the original policy.

Steps to Quote and Bind a Difference in Conditions Policy

Quoting and binding a Difference in Conditions (DIC) policy follows a specific process. Many of these policies are often placed through surplus lines markets, though steps can vary by carrier and risk.  A clear, organized approach helps reduce back-and-forth and improves client confidence.

Assess the Primary Coverage

Begin by checking the client’s primary policy or FAIR Plan to identify:

• Explicit exclusions
• Sublimits
• Deductibles
• Coverage gaps that concern the client or lender

This way you can see what gaps the DIC policy should cover. Never quote a DIC policy without first knowing what is already covered.

Gather Key Data

Gathering key documents before quoting can help streamline the process. Commonly helpful items often requested by carriers include the primary declarations page, a recent property appraisal, and records of roof or plumbing updates, though requirements may vary by insurer and risk.

Also, calculate the Total Insurable Value (TIV), which shows the full replacement cost and affects pricing and underwriting.

A simple checklist can help you avoid delays and should include:

• Primary Declarations Page
• Property Appraisal
• Roof/Plumbing Upgrade Records
• TIV Calculation

Secure Market Access

DIC coverage is often written on surplus lines paper, particularly for higher-risk placements, though not exclusively. Market access is typically obtained through:

• Surplus lines brokers
• MGAs
• Wholesale brokers
• Insurance aggregators

Direct carrier appointments are less common for this class of business.

Present and Bind the Coverage

Prepare the client for how these policies are structured. Higher-percentage deductibles are common (often 2–10%), particularly for earthquake and wind perils in catastrophe-prone areas. 

Flood deductibles may be structured differently and can sometimes be flat dollar amounts rather than percentages. Deductibles vary by carrier, location, and specific peril. Emphasize that DIC coverage is designed to fill critical gaps left by primary policies, helping ensure comprehensive protection.

Once the quote is accepted, move quickly with binding coverage, particularly when escrow timelines or lender deadlines are involved. Clear documentation and well-prepared risk data help avoid delays and keep the placement on track.

By following these steps, agents can quote and bind coverage faster. This method also improves risk management and helps in client retention. Keep organized, ask the right questions, and make sure all documents are ready before sending quotes.

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Who Sells Difference in Conditions Insurance?

Many independent agents know about DIC coverage but struggle with carrier access. While most standard carriers do not offer standalone DIC policies, some admitted carriers provide companion products or endorsements – such as earthquake coverage – that function similarly. However, for comprehensive gap coverage, a completely standalone DIC policy is often preferred, particularly for higher-risk properties.

Most DIC policies are placed with surplus lines carriers. These companies insure risks that standard markets will not cover. It is often hard to work with them directly. Getting a direct appointment usually means meeting volume requirements, waiting through long approval processes, and keeping up with production goals. For many agents, this is not a very practical option.

One way you can get carrier access is through a wholesale broker. Wholesalers already have relationships with surplus lines carriers and can place DIC coverage for retail agents. This method works, but it can add extra steps and slow down the process.

An insurance aggregator is a more efficient choice. Aggregators give agents shared access to markets through one onboarding process. This setup removes the need for separate carrier appointments and makes it easier to quote complex risks.

Platforms like FirstConnect act as a unified quoting platform, giving agents access to a wide carrier network. Agents can quote and manage coverage (to select carriers and book of business, including those who write DIC/Surplus Lines) all in one place.

This method helps agents place coverage more efficiently. Speed is important when a client is in escrow or has lender deadlines, and aggregator access allows agents to process coverage quickly while maintaining control of the client relationship.