Understanding the Three SFIP Policy Forms

The National Flood Insurance Program (NFIP) provides flood insurance through the Standard Flood Insurance Policy (SFIP). Unlike private insurance policies that vary by company, the SFIP is a federal regulation. Its terms and conditions are established by the government, and they are identical whether the policy is issued directly by FEMA or through a Write Your Own (WYO) private insurance company.

For the practice Flood questions, it is essential to understand that there are three distinct policy forms under the SFIP. Each form is designed for a specific type of risk, and choosing the wrong form can result in coverage gaps or claim denials. To master the broader context of these regulations, refer to our complete Flood exam guide.

The Dwelling Form is the most common SFIP form used for residential risks. It provides coverage for both the building and personal property (contents). This form is specifically used for the following types of structures:

• One-to-four family dwellings: This includes detached single-family homes, townhouses, and row houses.
• Individual residential condominium units: While the building itself might be covered by an association policy, the individual unit owner uses the Dwelling Form to cover their specific unit and personal belongings.
• Manufactured (mobile) homes: Provided they are anchored to a permanent foundation and meet specific NFIP requirements.

A critical distinction for the exam is the Loss Settlement provision. The Dwelling Form is the only SFIP form that allows for Replacement Cost Value (RCV) settlement on the building, provided the building is the insured's principal residence and is insured for at least 80% of its full replacement cost at the time of loss.

The General Property Form is used for larger residential buildings and non-residential risks. Unlike the Dwelling Form, this form typically settles building losses on an Actual Cash Value (ACV) basis, which accounts for depreciation.

This form is applied to:

• Five-or-more family residential buildings: This includes apartment buildings and cooperatives that do not qualify as condominiums.
• Non-residential buildings: This category covers commercial structures, small businesses, schools, churches, and government buildings.
• Non-residential contents: Used to cover the inventory and equipment inside a commercial structure.

On the exam, remember that even if a building is residential (like a 10-unit apartment complex), if it is not a condominium, it must be insured under the General Property Form rather than the Dwelling Form or the RCBAP.

The RCBAP is a specialized form designed for residential condominium associations. It is intended to cover the entire building, including all individual units and common areas, under a single policy. To qualify, at least 75% of the floor area must be residential.

Key features of the RCBAP include:

• Replacement Cost Value (RCV): Like the Dwelling Form, the RCBAP provides RCV settlement for the building, but it has a unique Co-insurance requirement.
• High Coverage Limits: The building limit can be as high as the total replacement cost of the building or the total number of units multiplied by the maximum limit available for a single-family dwelling (whichever is less).
• Mandatory Purchase: If a building is a residential condominium, the association is generally required to use this form rather than the General Property Form.