January 7, 2022

Don’t Get a “D” when purchasing a Companion DIC Policy.

Where to purchase a Companion DIC Policy

The Special Considerations for High Value Homes with DICs

What to Watch out for with Companion DICs

A DIC is a Differences in Condition policy – a poorly named policy that is used to pair with the California FAIR plan. Technically there is another type of DIC policy in the world of insurance. In this article we are speaking of a “companion” insurance policy, a differences in condition policy, that are used to pair with the California FAIR plan.

I believe that it is best to refer to these as Companion DIC policies to avoid any confusion.

What is the California FAIR Plan?

The California FAIR plan is the insurer of last resort in the State of California. Created in 1960s it was originally created to take on a small amount of property risks in the state that were so called uninsurable. With the recent wildfire crisis, 10s, 100s of thousands of Californians have been forced to use this type of insurance.

The California FAIR plan is an exceptionally limited policy that is NOT intended to be the only policy that an insured gets. Typically a consumer would purchase a DIC Companion Policy or at least a CPL policy in conjunction with the FAIR policy. To reiterate you would purchase two property insurance policies for one property.

In many parts of Marin County the FAIR plan is now the best option available to consumers.

What is a Companion DIC Policy?

A Companion DIC policy is the second policy that you purchase that “rounds out” the FAIR plan to more similarly align to be similar to either a DP3 or HO3 landlord/home insurance policy. Although what you will have is not the exact same, its the simplest explanation. Companion DIC policies often pick up coverages for Liablity, Theft, and Limited Internal Water Damage, among other coverages. The exact coverages of these plans – is not the focus of this article.

Not all insurers offer Companion DIC policies.

Where do Consumers Purchase DIC Companion Policies?

Consumers can purchase DIC policies through many insurance agents and brokers. Some, but not all insurance companies offer them. Whereby consumers in theory can purchase a FAIR plan direct from the State, this is not recommended, you cannot purchase the DIC policy through the State of California. Most insurance agencies though will typically have one or maybe two insurers that do DIC Companion policies.

You must purchase a FAIR plan to purchase a Companion DIC policy.

Special Considerations with Companion DIC policies for High Value Homes:

There are lots of structural problems with insuring high value homes to begin with. However when you are attempting to insure that risk with a High Value home it becomes all the more difficult. At the most basic level the California FAIR plan currently [as of 2022] caps total insurance coverage at $3MM. While that may sound like a lot, its not. The total coverage cap includes the extended rebuild endorsement, ordinance and law, personal property, among other coverages. What this means is that a significant percent of homeowners that use FAIR in Marin County, San Francisco, San Mateo, etc cannot possibly get enough insurance through FAIR. However those are the challenges with FAIR and are not the challenges necesarily with Companion policies.

Companion DIC policies are NOT all the same. Crafting and Creating a well covered companion policy takes time, effort, and experience. Some companion policies require that coverages on the FAIR exactly match the coverages on the Companion policy, and in the cases of high value homes, this is a big problem. Often the best solution when crafting these policies is to have numerous options available. Some DIC vendors will only write properties as owner occupied, many will not allowed for short term rental exposure, Still others don’t like flat roofts, or open pier foundations.

Often the best DIC Option is from an insurer that likley you have never heard of, someone that specializes in these more difficult situations. Not necesarily though.

What to Watch out for When Purchasing DIC Policies in California?

This article has previously discussed the rebuild valuation consideration. And there is a lot more to that subject. Another important consideration is in making sure that the occupancy is accurate. Simply stating that a policy is for a primary owner occupied when it is not, will not be good in the long run. The occupancy needs to be accurate.

Other structures, especially if occupied also needs to be properly addressed on the DIC policy form. If the primary structure is owner occupied but a second structure is rented out to a long term tenant that can require multiple FAIR and DIC policies on the property.

The liablity coverages need to carefully be considered. Often it is suggested that they are paired with a personal umbrella insurance policy to create a greater amount of liability cover.

There are numerous other important considerations to review before making an informed decision.

How NOT to get a D when Purchasing a Companion DIC Product:

Too often when consumers purchase a FAIR plan they immediatly just choose the DIC that the agent has access to. As an independent agent I can tell you point blank that often that is not the best option for them. Just as you would with a homeowners policy it is advisable to shop around for the best Companion DIC option befor purchasing the FAIR plan. The pricing and coverage differences can be astounding.

Another improtant step is to CONFIRM that the nonadmitted market does not have a competitvely priced option for you. Nonadmitted policies are often [but not always] written on HO3 or HO5 policy forms that only require one unified policy.

Please speak with a licensed insurance agent in your jurisdiction before making any coverages changes, additions, or deletions.