What is a “Difference in Conditions” endorsement for a home insurance policy?

Difference In Conditions:

• A blended approach
• Covers “difficult to insure” properties
• Fire and Smoke covered by CA FAIR Plan

These days we get calls from people having a difficult time finding insurance.  They are shopping for insurance for the home they just purchased or they’ve received a notice of “non-renewal” from their insurance company. If the reason you’re having trouble getting or keeping a policy is wildfire risk, there’s a new approach to insuring your home, giving you another choice in a challenging insurance market.

In prior articles we described the difference between admitted and non-admitted insurance companies, and explained a bit about how they work.  The “Difference in Conditions” endorsement is a blended approach to insuring your home – you get 1 policy for fire and smoke risk, and a second policy for everything else.  This article will explain a bit more about how this approach works.

An admitted carrier (in my case, Farmers) issues an insurance policy for everything except fire and smoke risk.   This provides coverage for water losses, falling trees, burglary, or a liability claim like slip and fall claim.  These smaller claims make up the majority of the losses homeowners experience.

Fire and smoke risk are covered by the CA FAIR plan.  The CA FAIR Plan is an insurance pool established to assure the availability of basic property insurance to people who own insurable property and who, beyond their control, have been unable to obtain insurance in the voluntary insurance market. The FAIR Plan is an insurance association, not a state agency. There is no public funding or taxpayers’ monies involved.

Is this approach right for you? Here’s a few things to consider:

• Because you have a policy with a traditional insurance company, you can qualify for mutli-line discounts on your auto insurance, helping you reduce the overall cost of insurance
• This approach gives you the opportunity to simplify your insurance purchase using just one agent for home/auto/earthquake and umbrella insurance.
• You qualify for CEA earthquake insurance because the home insurance is with a CEA partner company. You also have the option to purchase other earthquake insurance policies.
• Older homes may not qualify for surplus lines policies making this the only option for coverage.

There’s some limitations with the CA FAIR plan that may make this option undesirable:

• Coverage limits of $1.5mm for all lines of coverage meaning that there may not be enough coverage if you have a larger home.
• No extended replacement cost program
• Coverage limits for building code and emergency housing may not meet your needs.
• A surplus lines policy may be more cost effective

In the Oakland and Berkeley Hills, where many of the properties are older, or have not been renovated to meet the standards of the surplus lines market – the CA FAIR plan combined with a traditional insurance policy may be the best solution for insuring for your home.

My agency offers both a CA FAIR plan endorsement and Surplus lines policies.  We’re happy to provide a comparison for you if need a new policy.