Appraisal (Insurance)
An insurance appraisal is a professional evaluation process used to determine the value of damaged property or resolve disputes between insurers and policyholders about claim amounts. It can also refer to initial property valuations used to determine appropriate coverage limits and premiums.
Example
“After the insurance company and homeowner couldn't agree on the fire damage estimate, they invoked the appraisal clause and hired independent appraisers.”
Memory Tip
Think 'praise the value' - appraisers give professional 'praise' (assessment) to determine what something is worth.
Why It Matters
Appraisals provide an objective method to resolve claim disputes without expensive litigation, ensuring fair settlements for both insurers and policyholders. They also help ensure adequate coverage by establishing accurate property values before losses occur.
Common Misconception
Many people think insurance appraisals automatically favor the insurance company, but the process typically involves neutral professionals and can often result in higher settlement amounts than initial company estimates.
In Practice
After a kitchen fire, the insurance company estimates $25,000 in damages while the homeowner believes it's $40,000. They trigger the appraisal clause, each hiring an appraiser at $750 cost. The company's appraiser assesses $28,000, the homeowner's appraiser finds $37,000. Since they can't agree within $3,000, they hire a neutral umpire for $1,200. The umpire's final decision of $33,000 becomes the binding settlement amount.
Etymology
From the Old French 'appraisier' meaning to set a price or value, which evolved from 'preisier' meaning to prize or value something.
Common Misspellings
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Related Terms
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See Also
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