What Is the Appraisal Clause in an Insurance Policy?
Key takeaways
- •Appraisal decides the amount of loss, never whether coverage applies.
- •An award signed by any two of the three participants is binding on the amount.
- •Never invoke appraisal before your scope is complete and fully priced.
The short version
The appraisal clause lets either you or your insurer demand an independent valuation when you disagree about the amount of the loss. Each side hires an appraiser, the two appraisers select an umpire, and an award signed by any two of the three is binding on the amount. Appraisal does not decide coverage questions.
What appraisal can and cannot decide
Can decide: scope quantities, unit pricing, depreciation amounts, the value of damaged property
Cannot decide: whether the peril is covered, whether an exclusion applies, whether you complied with policy conditions
If the dispute is really about coverage, appraisal is the wrong tool.
How the process runs
- One party makes a written demand for appraisal referencing the policy provision
- Each party names a competent, independent appraiser
- The appraisers try to agree on the amount of loss
- If they cannot agree, they select an umpire; if they cannot agree on an umpire, a court can appoint one
- Any two of the three sign an award, which sets the amount of loss
- The insurer pays according to policy terms, less the deductible and prior payments
Costs
Each side pays its own appraiser. The umpire fee is normally split equally. Public adjuster fees and appraisal fees are different services with different fee structures - confirm in writing which you are engaging.
When appraisal makes sense
- The carrier accepts coverage but the estimate is far below the real cost
- You have a complete, defensible scope and documentation
- Negotiation has stalled and litigation is disproportionate to the amount in dispute
When to be cautious
- Coverage is being denied, not just undervalued
- Your own documentation is thin - appraisal rewards preparation
- Your policy contains conditions or time limits on invoking appraisal
Do not demand appraisal until your scope is complete and priced. The award is binding, and a rushed submission locks in a low number.
Get the number right before you commit
Long Island Public Adjusters prepares full scopes for Nassau and Suffolk County property owners and advises on whether appraisal is the right path. Call 516-410-0164 for a free claim review.
For official guidance on property insurance and claim rights, visit the New York State Department of Financial Services.
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