What is appraisal in insurance terms?

The concept of appraisal in insurance specifically refers to a process that takes place when the insured and the insurer cannot come to an agreement on the amount of a claim following a loss. This situation often arises during the claims process, particularly when there is a disagreement about the valuation of damaged property or the extent of losses incurred.

In such cases, both parties can invoke the appraisal clause, which is included in many property insurance policies. This clause allows each party to select an appraiser. The appraisers will assess the value of the loss independently, and if they do not agree on the outcome, an umpire may be chosen to help reach a resolution. This process ensures a fair determination of the payout amount based on the actual loss, thereby protecting the interests of both the policyholder and the insurer.

The other options do not accurately define appraisal. Investigating fraud or assessing property value may occur in broader contexts but are not specific to the appraisal process. Determining policy limits relates to the initial underwriting phase of a policy, rather than the settlement of a claim.