What Is Appraisal in Insurance, & When Is a Loss Ripe for It?
Insurance claims can sometimes feel like a tug-of-war. You’ve done everything right—filed the claim, provided documentation, and worked with the adjuster—but you and the insurance company still don’t see eye to eye on the amount of the loss. When this happens, policyholders and insurers have a built-in tool to resolve disputes without heading straight to court: the appraisal process.
What Is Appraisal?
Appraisal is an alternative dispute resolution (ADR) method used to settle disagreements about the value of a loss, not coverage issues. Many homeowner and commercial insurance policies include an appraisal clause, allowing either the policyholder or the insurer to invoke appraisal when there’s a dispute over the amount of damage or repair costs.
Here’s how it works:
Each side selects an appraiser. The policyholder and insurer each hire their own appraiser to assess the damage independently.
The appraisers select an umpire. If the two appraisers can’t reach an agreement, the dispute goes to a neutral umpire.
A binding decision is made. If two out of the three agree on the amount of loss, that decision becomes final and binding.
This process helps avoid lengthy litigation, speeds up resolution, and ensures a fair valuation when estimates don’t match up.
When Is a Loss "Ripe for Appraisal"?
Not every claim is a good fit for appraisal. Here are some signs that a loss may be ripe for appraisal:
✅ There’s a disagreement on the amount of damage or repair costs.
If the insurance company acknowledges the damage but offers a lower payout than what’s necessary for repairs, appraisal can help resolve the valuation dispute.
✅ Coverage has already been determined.
Appraisal won’t decide whether the loss is covered—only how much it’s worth. If the insurer denied the claim outright due to policy exclusions, appraisal isn’t the right path.
✅ Both sides have provided estimates, but there’s a significant gap.
If the policyholder’s contractor or public adjuster has an estimate of $50,000, and the insurer is only offering $20,000, appraisal can be a way to bridge the difference without a lawsuit.
✅ Negotiations have stalled.
If discussions with the adjuster aren’t getting anywhere and a fair settlement feels out of reach, invoking appraisal may be the next logical step.
When Appraisal May Not Be the Best Option
🚫 The dispute involves policy interpretation. If the insurer is denying coverage due to exclusions, misrepresentation, or policy language disputes, appraisal won’t help—these issues typically require legal action.
🚫 The cost of appraisal outweighs the dispute. While appraisal is usually cheaper than litigation, both parties must pay for their own appraiser, and they split the umpire’s fee. If the amount in question is small, the cost may not justify the process.
🚫 The damage is still unfolding. If additional damage is discovered, or repairs reveal hidden issues, it may be better to address those before moving forward with appraisal.
Final Thoughts
Appraisal is a powerful tool for resolving disputes fairly and efficiently—when used at the right time. If you’re facing a significant difference in damage valuation and coverage isn’t in question, appraisal could be the key to getting a fair settlement.
If you're unsure whether your loss is ripe for appraisal, reach out to an experienced appraiser who can guide you through the process. A well-executed appraisal can mean the difference between a shortfall and a fair recovery.