Few people think about disputes when purchasing property insurance. When they occur, many policyholders don’t know how to react. You can exercise your rights under the appraisal clause of your policy when you and your insurer don’t agree on the value of your covered loss.
The appraisal clause is a powerful tool that helps you and your insurance company avoid litigation. However, entering into an appraisal requires organization, preparation and knowledge of your rights. Let Bowthorpe & Associates Insurance Producers take the guesswork out of appraisal for you.
What Does the Appraisal Clause Cover?
The appraisal clause allows you to dispute the amount of your insurance claim. It cannot be used to appeal coverage denials or insurance company decisions that you think are unfair.
Both you and your insurance company will appoint a single appraiser. Together, those two appraisers will agree upon an umpire.
Should the appraisers be unable to agree on the value of your loss, the umpire will make the final decision.
Using appraisals can help you avoid years of litigation in court.
Why Do Disputes Arise?
Many factors can cause disagreements when filing insurance claims. However, the majority of appraisal disputes involve some degree of valuation inequity.
Your insurance company may use computer-generated estimates or depreciated values when determining how much your damage is worth. Your contractor or public adjuster may use replacement cost values and actual scope of repair to determine your loss.
The biggest dispute often comes from hidden damage. Structural damage, water damage, and code upgrades may not be considered during the initial estimate.
Your adjuster likely will not include the items in your appraisal unless you can prove they were present when the claim was filed.
Understanding the Appraisal Process
After you invoke your right to appraisal, both you and your insurer will need to select an appraiser. From there, the process tends to move quickly.
Both appraisers will perform their own evaluation of the damage. Once they submit their repair estimates, one of three things will happen:
Your appraisers will agree on a value.
The insurance company will pay you the appraised value of the loss.
If your appraisers cannot agree on a value, your umpire will make the final decision.
Speed is important. Don’t delay in selecting your appraiser or getting your documents in order. Any delay can affect how quickly you’ll get your money to make repairs.
You’ll want to prepare as much as possible. In many cases, the quality of your proof determines how much money you’ll receive.
Working With Your Appraiser
Just as you want an experienced insurance company representative on your side, you should look for an appraiser with experience in these claims.
An experienced appraiser should understand how to interpret construction costs and policy language. Plus, your appraiser should be familiar with local pricing trends and know how to properly dispute inflated or inaccurate valuation.
Always make sure your appraiser is willing to stand by his or her work. You want someone who will fight for you, but your appraiser isn’t your attorney.
Selecting an Umpire
If your appraisers can’t agree on value, your umpire will make the final decision. Choosing an umpire can be just as important as your appraisal.
You and your insurance company must agree on the umpire. This means you have just as much say in who the umpire is as they do.
Ideally, you want someone who has experience in these types of claims. Your umpire should also be neutral and free of any conflicts of interest.
Will Appraisal Cost Me Money?
One benefit of appraisal over litigation is that it won’t cost you as much time or money. However, that doesn’t mean the process is free.
You are responsible for paying your appraiser and half of the umpire’s fees. If you decide to hire an engineer or other experts, you pay for them too.
Although it will cost you money, keep in mind that a higher appraisal award can offset your costs.
After the Award
Once your appraisal is awarded, the insurance company is supposed to pay you. The appraisal award is binding between both parties and the amount of loss.
If your insurance company delays payment after appraisal, you may have other options based on how they treated your claim.
Keep in mind that your appraisal likely won’t cover issues of coverage. If your insurer denies part of your claim because of an insurance policy exclusion, you’ll still need to address that issue through other means.
Avoiding Appraisal Traps
Appraisal can work smoothly if you know what to expect. Unfortunately, some policyholders fail to prepare for the process.
Not providing enough information or taking too long to respond can hurt your chances during appraisal. By staying organized, keeping good records, and responding quickly, you improve your chances of recovering fair value.
Reviewing your insurance policy before you need to file a claim can also help you understand the timelines, expectations, and limitations of your policy’s appraisal clause.
Summary
Your insurance policy’s appraisal clause may be one of your most valuable rights. It can help you dispute the value of your insurance claim and speed up the claims process.
Just because you have the right to appraisal doesn’t mean it’s automatic. You have to know what you’re doing to use this clause to your advantage.
Let Bowthorpe & Associates Insurance Producers help you with your next appraisal dispute. We can help you understand your rights and ensure your insurer pays what you deserve.
Frequently Asked Questions
What is a property insurance appraisal clause?
It’s a clause in your insurance policy that allows for disputes to be settled by appraisal instead of litigation.
When can I demand an appraisal?
You can demand appraisal any time you and your insurer disagree on the value of a covered loss.
Who is responsible for the cost of an appraisal?
You pay your appraiser and half of the umpire’s costs. Your insurance company pays the rest.
Is appraisal binding?
The appraisal award is final and binding on both parties as to the amount of the loss. Coverage disputes are not determined by appraisal.
Can I sue my insurance company after an appraisal?
You can still sue your insurance company, but you cannot sue them over the value of your claim.