What Is the Appraisal Clause in Your Insurance Policy?

If you’ve ever had an insurance claim that didn’t go the way you expected, you may have heard the term “appraisal clause.” But what does it really mean, and how does it affect your claim? Let’s break it down in simple terms.

The Basics

The appraisal clause is a provision found in many property insurance policies. It provides a way to resolve disputes when you and your insurance company can’t agree on the amount of loss—that is, how much the damage is worth.

Instead of going straight to court, appraisal is a type of alternative dispute resolution that brings in independent professionals to make a binding decision on the value of the loss.

How It Works

1. Either Side Can Invoke Appraisal
   If you disagree with your insurance company’s estimate, or vice versa, either party can demand appraisal in writing.

2. Each Side Picks an Appraiser

   • You (the policyholder) hire an independent appraiser to represent you.

   • The insurance company hires their own appraiser.

3. The Two Appraisers Choose an Umpire
   If the two appraisers can’t agree on the amount, they bring in a neutral third party called an umpire.

4. The Decision Is Binding
   Once two out of the three (your appraiser, the insurance appraiser, or the umpire) agree on a number, that amount becomes the official settlement for your claim.

What Appraisal Does (and Doesn’t) Do

Appraisal determines the value of your loss (how much repairs or replacement will cost).

Appraisal does not decide coverage issues—in other words, it won’t determine whether the damage is covered under your policy in the first place.

Why It Matters

The appraisal clause can be a powerful tool for homeowners:

• It helps resolve disputes without going through lengthy and costly litigation.

• It brings in independent experts who look at the damage from both sides.

• It ensures the final decision is made by unbiased parties. The insurance company is not allowed to interfere with the process, which makes it much harder for them to influence the outcome. This helps level the playing field and protects the policyholder’s interests.