Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Commercial LinesMedium
A Florida-based manufacturing plant has a comprehensive Commercial Package Policy (CPP) that includes Commercial Property coverage for its building and contents. However, the plant is located in an area prone to sinkholes and needs coverage for direct physical loss caused by earth movement, which is typically excluded from their CPP. To address this specific exposure, which type of policy would best supplement their existing coverage?
- AEarthquake Endorsement
- BDifference in Conditions (DIC) Policy
- CBusinessowners Policy (BOP)
- DFlood Insurance Policy
Show answer & explanationAnswer & explanation
Correct answer: B. Difference in Conditions (DIC) Policy
A Difference in Conditions (DIC) policy is a specialized property insurance policy that covers perils typically excluded from standard Commercial Property policies, such as flood and earthquake (and often sinkhole, depending on the policy). It provides 'all-risk' type coverage for these specific gaps.
Why the other options are wrong
- A. An Earthquake Endorsement would cover earthquakes, but a DIC policy is broader and can encompass other earth movement perils like sinkholes, offering more comprehensive gap coverage.
- C. A Businessowners Policy (BOP) is a package policy for small to medium-sized businesses and has similar exclusions to a CPP, not supplementing them for earth movement.
- D. A Flood Insurance Policy covers only flood damage, not other forms of earth movement like sinkholes.
Difference in Conditions (DIC) Policy
A specialized property insurance policy designed to fill gaps in coverage left by standard commercial property policies. DIC policies typically provide 'all-risk' coverage for perils often excluded, such as flood, earthquake, landslide, and subsidence (including sinkholes).
- Fills gaps in standard property policies.
- Provides 'all-risk' coverage for excluded perils.
- Commonly covers flood, earthquake, earth movement (sinkhole).
Memory trick: DIC: 'DIFFERENT' coverage for 'EXCLUDED' risks.