What is the purpose of the appraisal process in an insurance contract?

The appraisal process in an insurance contract serves a vital role in resolving discrepancies between the insurer and the insured regarding the specifics of a loss, particularly the amount that should be compensated. When a disagreement arises about the value of a claim or the extent of damage, the appraisal process provides a structured method for both parties to present their assessments. Each party typically selects an appraiser, and if they cannot agree on the value, an umpire can be consulted to provide an impartial decision. This process is essential because it aims to facilitate an equitable resolution, allowing both the insurer and the insured to arrive at an agreed-upon loss amount without resorting to litigation.

The purpose is not to define terms of the policy or to determine liabilities, but rather to focus specifically on quantifying the loss when a disagreement has emerged. This is a crucial mechanism within property insurance policies that helps maintain fairness and transparency in claim settlements.