What does the appraisal clause in an insurance policy allow?

The appraisal clause in an insurance policy is designed to handle disputes over the amount of a loss. This clause empowers either the insured or the insurer to request an independent appraisal when there is a disagreement regarding the value of the insured property or the amount of loss incurred.

When the appraisal process is initiated, each party typically selects their own appraiser, and these appraisers then work together to agree on the valuation or loss. If they cannot reach an agreement, they may involve a third appraiser, known as an umpire, to help resolve the dispute. By formally allowing for this independent evaluation, the appraisal clause plays a critical role in ensuring that disputes regarding claims can be resolved fairly and efficiently without resorting to litigation. This is why the option identifying the ability to seek an independent appraisal for disputes accurately reflects the purpose and function of the appraisal clause within insurance policies.