What Is an Appraisal?
An appraisal is a professional assessment of a property’s value. Real estate can be appraised, but so can any other types of property. In the insurance industry, appraisals are used to calculate the cost of replacing the property or to determine the amount of damage to the property after a covered event.
When Is an Insurance Appraisal Necessary?
Homeowners commonly need insurance appraisals in two instances:
- When you purchase home insurance.
- After you experience property loss.
When you purchase home insurance, an appraisal helps you determine the value of your home and its contents so you can:
- Avoid being underinsured.
- Pay an appropriate premium.
- Decide if you need additional coverage for your personal property.
Your insurer may require an appraisal if your house is old or hasn’t been inspected in a while. You may also want to have your personal property appraised if you have valuable items like expensive jewelry or antiques and want to schedule those items. Scheduling property gives them more protection without drastically increasing your premium.
You may need an appraisal after your property is damaged by a covered incident, like a fire or windstorm. Once you file a claim, your insurance provider has an adjuster evaluate the damage and offer a settlement based on the appraisal.
How Does the Appraisal Process Work?
The appraisal process is essentially the same whether you want one before you buy insurance or after you’ve experienced a loss. A professional appraiser usually comes to your home to conduct the inspection. They evaluate a number of factors, such as the home’s:
- Square footage
- Lot size
- Number of bedrooms and baths
- General condition
- Improvements or renovations
The appraiser compares your home to similar homes in the area and use this information to determine your home’s value.
When an appraiser assesses damage during the claim process, they typically collect additional information, including:
- Witness statements
- Police reports
- Hospital or medical records
Once the insurance company approves the claim, the appraiser negotiates the settlement.
What Happens When You Disagree with a Claim Appraisal
As a policyholder, you may be able to dispute the appraiser’s valuation by initiating the appraisal clause. Most policies have this provision to help settle disagreements. It gives you the right to hire a professional appraiser who:
- Conducts their own inspection.
- Assesses your damages.
- Works with the insurer’s appraiser to find an impartial third party (sometimes called an umpire).
In some cases, your appraiser may work with the insurance company’s appraiser to come to a reasonable outcome. But when they can’t, they present their finding to the umpire who reviews both appraisals and determines the final settlement.
Invoking the appraisal clause is often less expensive and less time-consuming than hiring a lawyer and going to court. However, the final outcome is legally binding, and there’s no guarantee it will be any more satisfactory than the initial one. Additionally, the appraisal process can only remedy arguments over the amount of loss. Questions of whether the loss is covered cannot be answered through the appraisal process.