What Is the Appraisal Clause?
Filing an insurance claim after property damage can be stressful. But what happens when you and the insurance company don’t agree on the value of the loss? If negotiations stall, and you're facing a significant gap in estimates, the appraisal clause in your policy might be the solution.
Many policyholders don't realize they have the right to invoke the appraisal clause. Often, insurance companies won’t mention it as an option. In this post, we’ll explain how the appraisal clause works, when to use it, and what to expect during the process.
What Is the Appraisal Clause?
The appraisal clause is a provision in many property insurance policies. It lets policyholders and insurers resolve disagreements over the value of the loss (not coverage) without going to court.
Here’s how it works:
Invoke the appraisal
Either the policyholder or the insurer can request the appraisal, in writing, following the terms outlined in the policy.
Choose an appraiser
Both parties hire their own independent appraiser, who is licensed and experienced in property damage evaluations.
Select an umpire
If the appraisers can't agree, a neutral third-party umpire is chosen to make the final decision.
Binding decision
Once two of the three panel members (appraisers or one appraiser and the umpire) agree, that value is binding for both parties.
The appraisal clause offers a faster and more cost-effective alternative to litigation, ensuring disputes are resolved fairly.
When Should You Invoke Appraisal?
Not every insurance dispute qualifies for appraisal. Here are the conditions that may justify invoking it:
Disagreement over repair costs or damage scope
If your contractor estimates $75,000 in repairs but the insurer offers only $40,000, appraisal can help determine the correct amount.
Value, not coverage, is disputed
Appraisal addresses the amount of the loss, determining how much it should cost to repair or replace the damaged property, but it does not address whether something is covered.
If your claim has been denied outright, appraisal won’t help—legal action or mediation may be necessary instead.
Negotiations have stalled
If you've provided documentation, estimates, and proof of damages, but the insurer remains uncooperative, appraisal may be the next step.
What to Expect in the Appraisal Process
The appraisal process is structured but flexible, allowing each side to present evidence and make their case.
Here’s what you should expect:
Choosing an appraiser
Select an experienced, impartial appraiser who understands insurance claims, construction costs, and loss evaluation.
Gathering supporting evidence
Documentation, such as photos, contractor estimates, and expert reports, is key to building a strong case.
Appraisers negotiate first
The appraisers will attempt to reach an agreement before involving the umpire.
Umpire involvement
If the appraisers can’t agree, the umpire reviews both sides and makes a final decision.
The final decision
Once two panel members agree on the value of the loss, that number is set, and the insurer must pay accordingly.
Benefits of Invoking Appraisal
Faster than litigation
Appraisal typically resolves disputes in weeks or months, compared to years in court.
Less expensive
While there are costs involved, such as paying for your appraiser and half of the umpire’s fee, it is still often far cheaper than hiring an attorney and pursuing a lawsuit.
Fair and unbiased
Independent experts determine the value, leading to a more reasonable outcome.
Legally binding
Once settled, the insurer must honor the appraisal decision, providing clarity and closure, although coverage factors such as endorsements, limits, and exclusions will still apply.
Final Thoughts: Is Appraisal Right for You?
Is your insurance claim dispute centered around the value of the loss rather than coverage issues? We can help you use the appraisal clause to secure a fair settlement, but success depends on choosing the right appraiser and preparing strong documentation.
If you're unsure whether appraisal is the right step for your claim, don't wait. We’re here to guide you through the process and ensure you’re on the right path.
Need help with your insurance claim dispute? Contact us today, and we’ll help you take the next step toward a fair resolution!