Appraisal Clause in Your Car Insurance Policy

One of the common clauses most people don’t know about in their car insurance policy is the Appraisal Clause.

If you and your insurance company cannot agree on how much your claim is worth, the Appraisal Clause may be helpful to you. Whether you are disputing over the value of your car in the case of a total loss or the insurance company is refusing to pay the full cost to repair your vehicle. 

How Does the Appraisal Clause Work?

Most appraisal clauses work like this. If you and the insurance company don’t agree on how much your claim is worth, either party may invoke appraisal. Once either side invokes appraisal, you must hire an appraiser and the insurance company must hire an appraiser. Your appraiser will evaluate your damage claim and come up with an amount they believe the claim is worth. The insurance company’s appraiser will do the same. Then the two appraiser must get together and try to reach an agreement. If they reach an agreement, the claim is resolved and whatever amount they agreed to is final.  

If your appraiser and the insurance company’s appraiser do not agree, then the two appraisers select a third appraiser. Sometimes this is called an umpire. Some policies will say that whatever the umpire decides is final. Other policies don’t just leave the decision to the umpire or third appraiser and require that two of the three appraisers agree to a number.  

The Pros and Cons of Appraisal

Appraisal clauses can be a good option to resolve your property damage claim. It may be cheaper and faster than filing a lawsuit against your insurance company. But there is a cost. You will have to pay your appraiser and, if the case goes to a third appraiser or an umpire, you will have to split the cost of the third appraiser with the insurance company.  

Another drawback is you do lose control of the claim. Once a claim goes to appraisal, you should not be involved in the decision making. Whether it is the decision on the amount or the selection of the third appraiser. However, same goes for the insurance company. And I have seen where the insurance company stays more involved then they should which is a violation of the appraisal clause. 

This is why it is important to hire a skilled appraiser. And by skilled – they should have good knowledge of the issue – whether it is valuing vehicles or analyzing the amount of repair cost. But also they should be a skilled negotiator and understand the dynamics of the appraisal process. 

Also, the appraisal clause only works if you are making the claim on your own policy. If you were not at-fault in a crash and you are processing your claim under the at-fault party’s insurance policy, you cannot invoke the appraisal clause. 

Does My Policy Have an Appraisal Clause?

Now I mentioned earlier that appraisal clauses are different from policy to policy. Your policy may not even have an appraisal clause. Or, if your policy does have an appraisal clause, it may only apply in certain situations. For example, some appraisal clauses only apply to total loss claims. Some appraisal clauses only apply when there is a dispute on how much it will cost to repair your vehicle. 

The appraisal clause will be located in the Physical Damages section of your policy where it explains Comprehensive and Collision.

In general, I think appraisal clauses can be helpful to people. It’s not far fetched to think your insurance company will undervalue your vehicle in the event it is totaled. Or that your insurance company won’t pay the full amount to repair your vehicle. The appraisal clause can bring some balance to the situation. Especially when you continue to run into a dead end with the adjuster handling your claim. 

So if you’re shopping for insurance, check to see if the insurance policy has an appraisal clause. And also try to understand in which situation it can be used. If you’re currently in a claim and just running in circles with your adjuster, consider hiring an appraiser and invoking the appraisal clause. 

Here are a few of the expert appraisers our law firm recommends: