You have insurance on your building and its contents, but is your business covered for larger industrial or commercial risks such as floods and earthquakes, or international exposure?
With difference in conditions insurance, you can bridge those gaps in your coverage to protect your business, says Parker Berry, executive vice president at SeibertKeck.
“DIC policies usually provide catastrophic coverage for perils that present severe property exposures, such as flood and earthquake,” says Berry. “However, DIC policies also can be used to supplement coverage in operations with property in the open, burglary, spoilage and international exposures.”
Smart Business spoke with Berry about DIC insurance, what types of businesses need it and how it can protect your company.
How does DIC coverage work?
The DIC policy is not designed merely to increase property limits, as that can be accomplished through primary insurance. Rather, the DIC policy is designed to broaden coverage by providing additional limits of coverage for specific perils when your primary markets won’t provide adequate limits of coverage for your needs and providing coverage for perils that are excluded. It provides coverage that primary carriers are not willing or able to provide, such as for earthquake or flood.
For example, you may have property in the open and the most coverage your primary insurance company may be able to provide is $250,000. However, you need $2 million in coverage for that property. In this case, you can purchase a DIC policy to pick up the remaining gap of $1.75 million to get to that $2 million in coverage.
These are such broad policies that they should be tailor-made for each individual company’s needs and its individual situation.
How can a company determine if it needs for this insurance?
Determine your needs by doing a routine review with your agent or broker, who will look at your current policy levels and determine whether they are satisfactory for your insurance needs. If they’re not, what would it take to make them satisfactory, and can your primary insurance company handle that. If not, then you can look to a DIC policy for what can’t be covered by your primary carrier.
For example, say you have international exposure, and your primary coverage only provides certain limits in specific areas. With a DIC policy, you can cover the gap between what your primary carrier is able or willing to provide and the amount of coverage that you really need.
If you are a large enough organization and you have multiple locations in various countries, different limits of liability can be provided to you depending on the coverage. You can have your DIC policy drop down to all of those primary limits and add enough coverage to bring you up to $1 million, $2 million or whatever coverage you need.
There is no standard DIC coverage form. Carriers draft their own forms, so language in the policy should be carefully reviewed by you and your agent before agreeing to terms in order to avoid potential holes in coverage.
What kinds of companies need this coverage?
You don’t have to be a Fortune 500 company to take advantage of this sort of policy. You just need to have certain exposures that your primary carrier doesn’t offer. For example, a grocery store or restaurant could use a DIC policy to cover the gap between the spoilage limits its primary carrier provides and the limits it really needs.
The coverage all depends on a company’s exposure, not on its size. It’s like if you’re putting together puzzle and you’re missing one piece; you just don’t have a piece that fits. You can pull in DIC insurance, cut it to fit and finish the puzzle.
Does every company need to consider this type of coverage?
No. It’s not like auto insurance, where everyone needs to have it. DIC policies are too fluid, with the ability to change them and to tailor-make them. They’re the thing your agent should pull out of the bag when you have a problem. If you are saying you need more coverage for property out in the open, for spoilage, for flood or earthquake, than your primary carrier is able to cover, then DIC can be an answer.
It’s not something your agent is going to offer if he or she doesn’t know there is a problem. And you may not need it because you have all the coverage you need through your primary policy.
But if you have coverage needs over and above those that are available through your primary policy, then a DIC policy may be the answer.
Parker Berry is executive vice president at SeibertKeck. Reach him at (330) 865-6583 or email@example.com.
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