A Homeowner’s Guide to the Insurance Appraisal Process
When to Use It, How It Works, and What to Watch Out For
If you're in the middle of an insurance claim and can’t reach agreement with your insurance company about the amount of damage or the value of your loss, you may have a powerful option hidden in your policy: the Appraisal Clause. When used strategically, this clause can resolve valuation disputes without litigation—and potentially add thousands of dollars to your settlement.
This guide explains how the appraisal process works, when it’s appropriate, and what to expect if you decide to invoke it.
What Is the Appraisal Clause?
The appraisal clause is a provision found in many homeowners and business owners insurance policies (typically in the Conditions section). It allows either the homeowner or the insurer to formally request a non-judicial resolution of a dispute over the amount of the loss.
Here’s a typical example of how it appears in a policy (ISO HO-3 format):
“If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other…”
In short: if you disagree with your insurer about how much they owe—not whether the loss is covered, but how much they should pay—either party can trigger the appraisal process.
When to Consider Appraisal
Appraisal is meant to resolve valuation disputes, not coverage disputes.
Appropriate for appraisal:
Disagreements over repair costs
Differing damage assessments
Scope of repair or rebuild
Disputes about Personal Property values
Not appropriate for appraisal:
Denied claims (coverage disputes)
Disagreements over deductibles or Depreciation rules
Claims involving alleged fraud or misrepresentation
Disputes over policy language
Tip: Before invoking appraisal, both parties must show they’ve made a sincere effort to reach a fair agreement. Jumping to appraisal without attempting negotiation is discouraged.
How the Appraisal Process Works
Written Demand
Either party submits a formal written request to invoke appraisal. Your policy will specify how and when to do this.Each Side Appoints an Appraiser
You (the policyholder) select a competent and impartial appraiser
The insurance company selects their own appraiser
Each party pays for their own appraiser
The Two Appraisers Choose an Umpire
The umpire is a neutral third party who resolves disagreements
If the appraisers can’t agree on an umpire within 15 days, either party may ask the court to appoint one
The cost of the umpire is typically split 50/50
Inspection and Valuation
The appraisers review the damages, exchange estimates, and attempt to reach agreement
If they agree, the value is binding
If they don’t agree, the dispute is submitted to the umpire, and a majority decision (two of three) sets the final amount
Choosing the Right Appraiser and Umpire
The outcome of an appraisal often hinges on who you hire. Your appraiser should:
Be experienced with insurance claims
Understand Xactimate and construction cost breakdowns
Be impartial but advocate for a fair and accurate valuation
Know how to communicate with both the insurer’s appraiser and the umpire
Appraisers may be:
Licensed public adjusters
General contractors
Engineers or construction consultants
The umpire is typically a retired judge, engineer, Contractor, or a seasoned appraiser with a reputation for fairness and expertise.
Pros and Cons of Appraisal
Benefits
Non-litigious: avoids lawsuits and court hearings
Binding: once the award is agreed upon, it must be paid
Faster: often resolved within 2–3 months
Focused: limited to resolving the valuation dispute only
Often effective in securing higher settlement amounts
Risks and Pitfalls
No second chances: the award is binding, even if it's lower than expected
Fees can add up: if the dispute is small (e.g. under $10,000), the cost of appraisers and umpire may outweigh the benefit
Takes time: it can take weeks just to appoint appraisers and an umpire
Imbalance of experience: insurers often work with the same appraisers regularly, while homeowners may struggle to find one who knows the process
Doesn’t resolve everything: coverage denials or legal interpretation issues still require litigation or other remedies
Example Scenario: When Appraisal Makes Sense
Let’s say your contractor’s rebuild estimate is $210,000, but your insurer offers $154,000. You try to negotiate, submit supporting documents, and even bring in a consultant—but the insurer won’t budge. You're $56,000 apart, and the Scope of Work is fundamentally disputed.
At this point, appraisal could be the right path. You invoke the clause, hire an experienced appraiser, and go through the process. Ultimately, the appraisal award lands at $196,000—a $42,000 improvement over the insurer’s initial offer.
Wrap-Up
If you’re stuck in a claim and the insurer refuses to move on the value of your damages, invoking the appraisal clause can be a powerful tool—when used wisely.
But it’s not automatic. To succeed, you need:
A clear valuation dispute
A solid understanding of your policy
The right professional team on your side
A willingness to accept the outcome as final
Loti offers appraisal support and public adjusting services in many states. If you're unsure whether appraisal is right for your claim—or you need help preparing for it—consider consulting with a licensed expert before making your move.