The Foundation of Property Insurance
While modern homeowners and commercial property forms have largely superseded it, the Standard Fire Policy (SFP) remains the essential DNA of almost all property insurance contracts. For candidates preparing for the complete FL 2-20 exam guide, understanding the SFP is critical because it establishes the baseline for coverage, exclusions, and conditions.
The SFP is often referred to as the "165 lines" because the conditions section was traditionally printed in exactly 165 numbered lines on the back of the policy. It is a named peril contract, meaning it only covers losses resulting from the specific causes of loss listed in the policy. Unlike modern "open peril" policies, if a cause of loss isn't named in the SFP, there is no coverage.
The Three Core Perils of the SFP
Direct Loss and Named Perils
The Standard Fire Policy is designed to cover direct loss only. A direct loss is physical damage to the property itself, such as a wall charred by flames. It does not cover indirect losses, such as the loss of rental income while the building is being repaired, unless an endorsement is added.
The policy covers three primary perils:
- Fire: The policy distinguishes between "friendly" and "hostile" fires. A friendly fire is one contained where it is intended to be (like a fireplace). A hostile fire is one that has escaped its intended bounds. The SFP only covers hostile fires.
- Lightning: Damage caused by naturally occurring electricity from the atmosphere.
- Removal: This is a unique "consequential" coverage. If you move your property out of the path of an approaching fire to protect it, the SFP covers that property at the new location for up to five days, even against perils not normally covered by the policy.
To master these concepts for your license, you should regularly engage with practice FL 2-20 questions to see how these perils are tested in scenario-based formats.
SFP vs. Modern Homeowners Policies
| Feature | Standard Fire Policy (SFP) | Modern HO-3 Policy |
|---|---|---|
| Perils | Named Perils Only | Open Peril (All Risk) for Dwelling |
| Valuation | Actual Cash Value (ACV) | Replacement Cost (usually) |
| Liability | None (Property Only) | Included (Section II) |
| Theft | Excluded | Included |
The 165 Lines: Key Conditions
The "165 lines" contain the rules of the game. If an insured fails to follow these conditions, the insurer may have the right to deny the claim. Some of the most important lines tested on the Florida 2-20 exam include:
- Concealment and Fraud: The policy is void if the insured willfully conceals or misrepresents a material fact.
- Pro Rata Liability: If multiple policies cover the same property, the SFP pays only its proportion of the loss. This prevents the insured from profiting by collecting full payment from two different companies.
- Requirements in Case of Loss: The insured must give immediate written notice, protect the property from further damage, and submit a signed Proof of Loss within 60 days.
- Appraisal: If the insurer and insured disagree on the value of the loss, either party can demand an appraisal. Each selects an appraiser, and the two appraisers select an umpire.
- Subrogation: The insurer acquires the right to sue a third party responsible for the loss after paying the insured.
Exam Tip: ACV is the Standard
Unless modified by endorsement, the SFP pays on an Actual Cash Value (ACV) basis. ACV is defined as Replacement Cost minus Depreciation. For the Florida 2-20 exam, remember that the SFP never pays more than the limit of insurance, the ACV, or the cost to repair/replace—whichever is least.
Frequently Asked Questions
No. The SFP is a limited peril policy. It only covers Fire, Lightning, and Removal. Theft coverage must be added via an endorsement or found in a more comprehensive policy like a Homeowners form.
The SFP provides 5 days of coverage for property removed from the premises to protect it from the insured perils. This is a very common exam question.
While technically possible, it is rarely used alone. It usually serves as the foundation for more complex policies or is used for very specific risks, such as vacant buildings or properties that do not qualify for standard homeowners insurance.
The Appraisal provision is triggered. Each party hires an appraiser, and they work with an umpire to determine the value. Note that appraisal is for the amount of loss, not for whether the loss is covered (which is a legal question).