Understanding The
Insurance Appraisal Process
Has your insurance company forced you into the Appraisal Process?
What? When? Where? How? Get the answers your need.

Many homeowners and business owners find themselves disagreeing with their insurance company's analysis of their insurance claim. However, most are unaware that they can dispute the insurance company's findings via the Insurance Appraisal Process! Even though the policyholder (you) submits a contractor's estimate, receipts for repairs or materials, or even photos showing damages that the insurance company did not include for repairs... they still won't budge.

Most policyholders are unaware of how to dispute and resolve their claim with the insurance company. Policyholders have a choice and a voice within their policy for this very purpose. It's called The Appraisal Clause - also know as The Appraisal Provision. Now, don't let this scare you. It may seem like a fancy clause that would take a law degree to understand. However, a simple way to understand it is that it's the insurance industry's version of arbitration. Although similar, the Appraisal Process is NOT an arbitration or mediation and the umpire is not an arbitrator, mediator, or judge. Insurance Appraisal, Mediation, and Arbitration are separate things.

In short; Arbitration requires attorneys and a legal process, where Insurance Appraisal does not require attorney's or a legal process. (For a more detailed description visit "Arbitration and Apprisal - What's the Diference?")

Most Policies Have the Insurance Appraisal Clause

If you feel your at a dead end with your insurance company and want to resolve your claim you'll need to check your policy for the Appraisal Clause. Most policies will have the provision listed under the "What to do after a loss," section or the "Conditions" section of the policy. Below, you will find a sample of a typical Insurance Appraisal Clause included in most policies. Keep in mind that policies can be different in each state. Therefore, you should read your own policy to see if this clause exists. It will say something similar to the following ;

APPRAISAL - If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal.  If either makes a written demand for appraisal, each shall select a competent, independent appraiser.  Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand.  The two appraisers shall then select a competent, impartial umpire.  If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire.  The appraisers shall then set the amount of the loss.  If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire.  Written agreement signed by any two of these three shall set the amount of the loss.

How Do I know if the Insurance Appraisal Process is a Good Option for My Claim?

If the Appraisal Clause is in your policy then it is always an option. However, it's wise to point out that Appraisal is usually an option when there is a substantial difference in the amount between the two estimate totals. For example; let's say a fire completely destroys a house and the homeowner’s personal property within it (Know as the Contents). The differences between what the insurance company wants to pay and what you wish to receive is $5,000. In this situation, the Appraisal Process is not the best idea. After paying the fees involved for the appraisal, you may not end up with much of the $5,000 being disputed.

Now, if we take the same fire that destroys the property and the dispute between the policyholder and the insurance company is $40,000, appraisal should be considered. The policyholder now has a chance to recover substantially more money than originally offered.

Also, the Appraisal Clause is only applicable if a dispute arises from a covered loss. If the insurance company denied the claim as something not covered then this is not a dispute on the amount to repair, but rather a dispute on coverage. For example; homeowners and business policies due not cover floods. Flood policies are purchased separately. So, if there is no coverage for the flood damages then the Appraisal Process is not an option.

Simply put, the Insurance Appraisal Process is to determine the "amount of loss," to property only. The Appraisal Panel is not to determine coverage, policy provisions, deductibles, how much was previously paid on the claim, etc. Let's say there was an appraisal for a grand piano that fell off a delivery truck on the highway. The Appraisal Panel's job is not to determine who's at fault, the policy coverage limit, if the truck had a registration, or anything other than "How Much is the Piano Worth."

As with our example earlier, if the insurance company offers a settlement of $10,000 to repair a roof and the policyholder has contractor bids for $15,000, then the Appraisal Process may not be the best option. The Appraisal Process may cost more than the $5,000 that's being disputed. Unfortunately, the differences in repair/replacement costs are usually much greater. When an insurance company generates an estimate for a claim of $75,000 and the policyholder has acquired professional bids several contractors of $200,000 or more, its time to invoke the appraisal clause.

Beginning the Insurance Appraisal Process

Either party associated with the policy can invoke the Appraisal Process. However, such a request must be made in writing. Each policy will have a time limit of when this can take place. Even if a claim has been closed for many years, either party can still dispute the claim and reopen for review. It's recommended that the request to invoke appraisal be sent via certified mail. Once the request to invoke the Appraisal Clause has been initiated, as explained earlier, each party, the insurance company and policyholder, appoints an Independent Appraiser. (If you wish to invoke the appraisal clause in your policy you need to submit a letter to your insurance company. Find more information at http://www.insurance-appraisal-services.com/invoke-appraisal.html )

Choosing An Independent Appraiser

It's important to select an Independent Appraiser that has experience with the damages being disputed in the claim. A person with expert knowledge of insurance claims handling and firsthand knowledge of the damaged property and its replacement cost. For example; a person with expert knowledge of insurance claims handling and with expert knowledge of the Appraisal Process, with little experience on the costs to replace an antique grand piano may not be the best choice. In the case of a home or building fire; a good Appraiser is someone who can generate their own line-item detailed estimate to repair or replace the damaged property, can secure multiple bids from reputable contractors to back u their findings, knows building codes, and can articulate unforeseen costs of repairs. If a building has historic features with materials like, solid Adler doors, large detailed moldings, and custom cabinets, a great amount of research with a salvager may be needed. The Appraiser should have experience with building procedures, materials and the cost of such terms to create an accurate "amount of loss," to return the property to its pre-claim condition. See, the policy provides coverage to replace the damaged property with those of like kind and quality. An Independent Appraiser that is not familiar with, or that does not have experienced contractors, engineers, and other experts to consult with about mold, demolition, cost associated with contents, and in some cases, additional living expenses, does not sound like a good candidate. You should choose your Independent Appraiser wisely. Look and interview someone with experience of the type of damage you have and with the type of property damaged, as well as a specialist when it comes to the Insurance Appraisal Process and also Insurance Claims Handling.

Many people confuse the words Independent Appraiser with that of a real estate appraiser. As you can see, a real estate appraiser is far from what is needed for an Insurance Appraisal. An Independent "Insurance," Appraiser is an insurance claims expert on costs and processes to repair or replace damaged property. (More about Independent Insurance Appraiser here)

The next question is, "Who will have such knowledge?" People requesting assistance in the past have asked if the following experts with the following backgrounds are good choices ;

Structural Engineers: This person may be a structural expert and could probably provide a good estimate to replace a building, but what about the contents (furniture, food, etc.) damage? Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process?

Construction Attorney: A Construction Attorney most likely has knowledge of construction contracts and issues that building contractors have. Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process, the contents damaged? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Construction Superintendent or General Contractor: Again, excellent choice for generating a structural estimate, but is most likely not familiar with insurance claims... and even more importantly, the Insurance Appraisal Process.

Insurance Claim Attorney / Lawyer: Keep in mind that the process was designed to keep these types of disputes out of court. You can surely use an attorney as your appraiser; however, the fees can exhaust your reward. Attorney's fees range between 30% and 40% of the amount collected. This will dig deep into the net amount you receive. An Insurance Attorney will also have expert knowledge of the policy. However, the Appraisal Provision clearly notes that no policy provisions will apply. Has the attorney represented their clients in many appraisals or mostly in court cases? How familiar are they with the Appraisal Process, building costs, construction practices, the contents damaged? Does the attorney know anything about the software used by insurance companies? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Independent Insurance Appraiser: Doesn't it make sense to hire an individual who is an expert of the process in which you are about to engage? You've heard the expression, "Would you go to your auto mechanic if you needed brain surgery?" It is highly recommended to use a qualified, professional, Insurance Appraiser. This professional will already know the Insurance Appraisal Process. They will also have qualified professionals (engineers, contractors, inspectors, etc.) at there disposal to back up their analysis.

Advantages to the Appraisal Process

There are several advantages to the Insurance Appraisal Process. The most obvious is costs. Insurance Attorney's will usually charge 30% to 45% of the total award. On a $200,000 claim, the attorney's fee would be in the range of Sixty to Ninety-thousand dollars ($60,000 to $90,000). That can hurt a policyholder trying to rebuild their life. Remember, the Insurance Appraisal Process was designed to keep these disputes out of the courtroom.

The advantage of invoking appraisal allows for a less formal or no-legal proceeding. An Independent Appraiser usually charges in the range of $125 to $200 per hour. Using the same example above with an award of $200,000; if the dispute took 25 to 50 hours, the cost would be in the range of Five Thousand to Ten Thousand dollars ($5,000 to $10,000). This can be a significant difference.

Another advantage is time. The courtroom can delay an insurance claim dispute for years, where the Appraisal Process usually only takes a few months. Sometimes it can last longer depending on the complexity of the claim. However, the courtroom will most certainly be longer. The result of less time and less cost becomes a less of a burden for both sides of the dispute.

Once an award is signed the insurance company has 30 to 60-days (depending on state) to settle the award.

Should I Demand Appraisal?

The Playing Field Remains Level,
and The Process Works Fairly For
Both Parties... Not Just The
Insurance Companies!





The Insurance Appraisal Process
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