Insurance Term of the Day: Appraisal
One thing you should always remember about the insurance industry is this: insurance is constantly evolving and changing, just like the rest of the world. There is not much in this world that consistently remains the same.
This is also important to remember when dealing with insurance claims, specifically, appraisals. Have you ever heard the term appraisal? What exactly is it?
Appraisals are mentioned in your homeowners insurance policy in the Loss Settlement section. The purpose is to assist you and your insurance company in coming to an agreement regarding how much should be paid out on a claim. When the policyholder and the insurer cannot agree on how much a settlement, an appraisal helps both parties come to an agreement without the need of a lawsuit. Appraisals do not involve specific coverages, but instead focus only on the amount of loss.
If you think your loss is greater than the insurance company has offered to pay, you may request an appraisal per the terms of your policy. Appraisers must be neutral and unbiased. Both the policyholder and the insurance company will hire an appraiser to determine the amount of loss using different strategies. If the two appraisers come up with different amounts of loss, they will then communicate to come to an agreement on how much the claim is worth.
The appraisal process ensures that a lawsuit is not necessary, saving you money on a lawyer. Should the two appraisers disagree on the amount of loss, an umpire may get involved to settle the dispute. The umpire is chosen by both appraisers. If the disagreement ensues, a lawsuit may become necessary at this point.
The appraisal process ensures that you are getting the fair amount for your insurance claim. Because everything is constantly changing, insurance companies may mistake exactly how much the claim is worth. Pricing always varies–whether it’s the cost of materials to replace something, or even the cost of labor.
When do you need a home appraisal?
- When you are about to sell your home, in order to determine the fair market value of the property.
- Appraisals are needed in order to calculate property taxes.
- When it comes to insurance, you’ll need an appraisal to determine the value of your home when there is a dispute.