What Is A Homeowners Insurance Appraisal?

Understanding the Home Insurance Appraisal Clause

Nearly all homeowners’ insurance policies include an Appraisal Clause, which activates when both parties agree on coverage of the loss but disagree on the amount of the loss. The clause generally reads:

“If you and we fail to agree on the amount of loss, either may demand an appraisal. Each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree on an umpire, either may request that a judge of a court of record appoint one. The appraisers shall separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of loss.”

This clause establishes a framework for resolving valuation disputes, rather than disputes regarding the existence of coverage.

Who Are the Key Parties in an Appraisal?

Your Appraiser

You, the policyholder, select a competent and impartial appraiser, typically a public adjuster, contractor, or restoration professional with valuation experience. This person advocates for a fair damage estimate on your behalf.

The Insurance Company’s Appraiser

The insurance carrier will also appoint an appraiser, typically someone who aligns with the carrier’s financial interests. These two appraisers work to find common ground.

The Umpire

If the two appraisers cannot agree on the value of the damages, they submit their differences to a neutral umpire, who is mutually chosen or appointed by the court. If any two of the three agree, that decision becomes final and binding.

When to Invoke the Appraisal Clause

You may consider an appraisal when:

  • The insurer acknowledges coverage but offers a lowball settlement
  • There is a significant disagreement over the scope or pricing of the damage
  • The claim has stalled, and further negotiation has failed
  • You want to avoid litigation but still fight for a fair payout

Appraisal is not appropriate if your claim was fully denied or if the dispute involves policy interpretation, coverage exclusions, or alleged fraud.

What Is the Appraisal Process Like?

Step 1: Demand for Appraisal

Either party can make a formal written demand for appraisal once a disagreement arises. This must be done by the timeline and procedures specified in the policy.

Step 2: Appraiser Selection

Each party hires their own appraiser. Choose carefully. Your appraiser must be skilled in estimating damages and negotiating strongly on your behalf.

Step 3: Umpire Agreement

The two appraisers select a neutral umpire. If they cannot agree, a court may appoint one. The umpire only gets involved if the appraisers disagree on the amount of loss.

Step 4: Damage Assessment

Both appraisers conduct independent evaluations of the loss. They analyze photos, receipts, contractor bids, structural reports, and prior repair estimates.

Step 5: Negotiation and Decision

  • If both appraisers agree on the value, that becomes binding.
  • If they disagree, the umpire reviews the case and breaks the tie.
  • A written decision signed by any two of the three is final.

Pros and Cons of the Appraisal Process

Benefits:

  • Faster than litigation
  • Binding resolution without going to court
  • May result in higher settlement amounts
  • Keeps the claim out of the courtroom
  • Often leads to more fair and transparent evaluations

Drawbacks:

  • You pay your own appraiser’s fees, and half the umpire’s fee
  • The decision is binding and final
  • The process doesn’t resolve coverage denials
  • Insurers may weaponize appraisal to delay or cap payouts

What Happens After the Appraisal Award?

Once the appraisal panel reaches a decision:

  • The insurer must issue payment based on the agreed amount, minus deductibles and prior payments.
  • The decision is not negotiable.
  • It cannot be overturned unless you prove fraud, collusion, or bias, which is extremely difficult.

Use Appraisal Strategically

A home insurance appraisal is not a loophole; it’s a strategic legal tool designed to protect homeowners from unfair claim settlements. If your insurance company refuses to budge on the value of your loss, invoking the appraisal clause with a knowledgeable appraiser may help you recover thousands more than initially offered.

Always review your policy carefully, consult with professionals, and take action before your statute of limitations expires.