What Is a DIC Policy? Why CA FAIR Plan Homeowners Need One

AEC Insurance Services

Oct 9

3 min read

If your home is insured through the California FAIR Plan, there's a good chance you're missing coverage you'd assume you have. FAIR Plan rates are rising an average of 29.1% at renewals starting October 15, 2026 (KQED), so it's a good time to make sure you're actually protected for what you're paying.

Here's what the FAIR Plan covers, what it doesn't, and how a DIC policy fills the gap.

What the FAIR Plan covers (and what it doesn't)

The FAIR Plan is California's insurer of last resort. Its dwelling policy is a named-peril policy: it covers only the causes of loss it lists, which are fire and lightning, internal explosion and smoke. Vandalism coverage is available as an optional add-on. (California FAIR Plan) Residential coverage goes up to $3 million per location. (CA Department of Insurance)

What it does not include are the everyday protections most people expect from home insurance, like water damage, theft and personal liability. (CA Department of Insurance fact sheet)

So what's a DIC?

A Difference in Conditions (DIC) policy, often called a "wrap-around" policy, is a separate policy designed to pair with your FAIR Plan policy. It adds the coverage the FAIR Plan leaves out, such as water damage, theft and liability, so that together the two work more like a standard homeowners policy. A DIC does not provide fire coverage itself; that stays with the FAIR Plan. (CA Department of Insurance fact sheet)

One important detail: the FAIR Plan does not sell DIC policies. You have to buy one separately, through a broker or directly from an insurer that offers them. (California FAIR Plan)

FAIR Plan alone vs. FAIR Plan + DIC

Coverage	FAIR Plan alone	FAIR Plan + DIC
Fire, lightning, smoke	Yes	Yes (from the FAIR Plan)
Water damage (like a burst pipe)	No	Yes
Theft	No	Yes
Personal liability (if someone is hurt on your property)	No	Yes

Exact coverage varies by DIC policy. Always compare the actual policy wording.

Why this matters

Only about half of FAIR Plan policyholders also carry a DIC policy, according to the California Department of Insurance, which means many FAIR Plan homeowners are likely missing that added coverage. (CA Department of Insurance fact sheet) Stanford researchers found the same pattern in 2026: nearly half of FAIR Plan customers buy additional policies to fill the gaps. (Stanford)

Without a DIC, these everyday situations could come straight out of your pocket:

A pipe bursts under the kitchen sink and ruins your floors and cabinets.
Someone breaks in and takes electronics, jewelry or tools.
A guest slips on your stairs and files a claim for their medical bills.

What to look for in a DIC policy

Built to wrap the FAIR Plan. Make sure it's written to work with your FAIR Plan policy so there are no gaps or overlaps between the two.
Enough liability. Check the liability limit and whether it fits your assets.
Dwelling and contents details. Look at deductibles and whether losses are paid at replacement cost or actual cash value.
Who's behind it. The Department of Insurance keeps a list of insurers that sell DIC policies. A broker can compare them for you.

Or skip the two-policy setup entirely

A FAIR Plan policy plus a DIC is a workaround. A standard homeowners policy (an HO-3) already covers water damage, theft and liability along with fire, all in one policy. (CA Department of Insurance fact sheet) With more standard carriers writing California homes again under the state's Sustainable Insurance Strategy, some FAIR Plan homeowners may now qualify to move back to a single, more complete policy.

Either way, we'll lay it out plainly: a DIC to round out your FAIR Plan, or a standard policy that replaces both. AEC Insurance Services is a family-run brokerage in Thousand Oaks, and we never submit an application without your OK.

See if my home qualifies

Prefer to talk? Call Albert, Chris or Justin at 805.328.5001.

Sources

This article is for general information only and isn't a quote or coverage advice. Coverage, eligibility and availability vary by property and carrier.