Difference in Conditions Coverage: Do You Need It?

Often referred to as a “gap filler” policy, Difference in Conditions coverage is a versatile, if lesser known form of property insurance.

Purchased in conjunction with an underlying commercial property policy, this type of insurance has become less common now that many property insurers provide coverage on an all-risk basis.

However, for certain businesses, the valuable protection provided by this type of policy may be critical in recovering from losses not covered (or not adequately covered) by standard property insurance. If the following circumstances apply to your business, purchasing a Difference in Conditions policy may be the right move:



Due to the often catastrophic liability associated with providing insurance coverage for earthquakes, they are excluded from most commercial property insurance policies. If your property insurer does not offer earthquake coverage, cannot provide sufficient coverage for your needs, or offers coverage at premiums that are prohibitive, a Difference in Conditions policy may be your best option.

One thing to note is that earthquake policies sometimes utilize a percentage deductible along with a dollar minimum where exposure is particularly high. These tend to range from two to five percent and are calculated based on the value of the property.



For the same reasons stated above, flood coverage is usually excluded from standard commercial property insurance as well. A typical feature of most Difference in Conditions policies written for businesses in an area at high risk for floods is a provision that coverage applies only as excess over an underlying National Flood Insurance Policy (NFIP.) This must be purchased beforehand and acts functionally as a flood deductible. The NFIP currently provides commercial insureds with coverage of $500,000 for building and $500,000 for contents.


Overseas Business 

In standard commercial property insurance, coverage extends only to the United States, U.S. territories and possessions, and Canada. Obviously, businesses that ship property to or receive property from overseas require wider coverage. Additionally, many standard property policies do not cover property while it is in transit or provide business interruption coverage for situations resulting from property lost or damaged in transit. A Difference in Conditions policy can provide coverage for both situations.


Business Interruption/ Income

If you decide to purchase a Difference in Conditions policy for earthquake or flood, keep in mind that business interruption or business income coverage is not typically included in these policies. If things like lost income, rent, and additional incurred expenses in the wake of an earthquake or flood are a concern and you already carry these coverages in your commercial property policy, you will need to ensure they are specifically included in your Difference in Conditions policy as well. It is also worth noting that the NFIP currently does not offer any form of business interruption coverage.



Though now less common, a Difference in Conditions policy can provide certain businesses with valuable coverage otherwise not typically available through standard commercial property insurance or excess coverage for losses covered by a primary policy. As there is no “standard” Difference in Conditions policy, the language must be carefully reviewed at the time of purchase and any time you file a claim. If a loss occurs, our professional public adjusters can assist you in reviewing your policy and ensure you file the most comprehensive claim possible.

Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.

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