Insurance is meant to protect your property.  If your property is lost, damaged or stolen and it is protected by insurance, you can make a claim with your policy to compensate you for the loss.  However, the owner of the property and the insurance company may not agree on the value of the property or the loss.  When this occurs, an appraisal may be necessary to determine the property or claim’s value.

What Is an Appraisal?

An appraisal is a structured process in which an experienced person knowledgeable about the value of property in question determines the value of an asset.

Appraisals help determine the value of property to determine how much insurance is necessary to protect the property or in determining the value of the loss of insured property.  They often use multiple perspectives to determine the value of an asset.  A trained and certified appraiser who is familiar with the type of asset and the market in which the asset will be purchased or sold completes the evaluation by using specified standards and professional methods.

The appraiser must consider all factors that affect the value of an asset, such as the purchase price, market value and potential future earnings.

Different Types of Appraisals

There are various types of appraisals, including the following:

Small Business Insurance

Appraisals are sometimes necessary when a business is applying for commercial property insurance.  The appraisal process helps to identify how much insurance coverage is necessary to properly protect the business assets.

Appraisals are also necessary when a business owner makes a claim against the policy and he or she does not agree with the claim’s adjuster’s assessment of the value of the claim.

Business Valuation

Appraisals are also used to determine the value of a business so that a fair price can be made for the business during a purchase or sale.  In addition to determining the value of the hard assets like the building and land, an appraisal on a business also takes other factors into consideration, such as the value of all assets in the business, including equipment, fixtures, vehicles and furniture as well s intangible assets like the business’ goodwill.  Appraisers will also use other methods to value the business, such as applying a multiplier on earnings to estimate future earnings.

Real Estate Valuations

One of the most common types of appraisals is a real estate appraisal, which helps determine the value of real property.  When a person buys a house or other structure, an appraiser is often called to assess the condition of the property and its market value to determine if the property is a certain value to justify the mortgage or purchase of the property.  Mortgage issuers use appraisals to ensure that they do not provide financing that exceeds the value of the secured property.

Appraisals can also be used to determine the value of cars, boats, other motorized vehicles, jewelry, artwork and other assets.

Appraisals as Part of Insurance Policies

Insurance policies often include provisions relating to appraisals.  They may state that if the insured and the adjuster do not agree on the value, then an appraisal will be triggered.  This is a nonjudicial process that can help resolve the dispute.

The insurance contract will specify how the appraisal will be carried out.  Generally, the insurance company will be entitled to call in its own appraiser to determine the value of the claim while the insured will also have an opportunity to have an independent appraiser assess the value.  The insured may first have to make a written request for an appraisal before being able to complete this next step.

The appraiser then arrives at the site of the property to assess the property.  The appraiser also reviews information about the property, including documentation related to its purchase history, pictures, public records and records of recent sales of the property or similar property.  The appraiser uses this information to calculate the value of the property or claim.

The appraiser from the insurance company and the insured may not agree on the value, but they may discuss their differences to try to resolve the disagreement.  They may review documents, estimates and differences to reach points of compromise.  They will try to resolve the differences they have between the damage and costs involved in the claim.  If they reach an agreement, this will be the determined value of the claim and the process can continue so that the insured receives the funds from the claim.  If the appraisers cannot reach an agreement on the value of the claim, they may involve an insurance umpire to make a final determination on the value.  An umpire is an arbitrator who makes a final ruling after reviewing the information presented by both sides.  The umpire may ask questions of the independent appraisers to try to determine a more accurate value of the claim.  After arbitration, the arbitrator will make a final decision, which is binding on the parties.  The insurance company pays the amount to the policyholder.

The appraisal process will be dictated by the language in the insurance contract.  It may specify a certain number of days that the insured must provide notice to the insurance company and how many days the appraisers can try to resolve their differences regarding the value of the claim.

Generally, each party is responsible for paying their own appraiser.

What Are Insurance Appraisals Necessary?

Insurance appraisals are necessary when the insurance company and the policyholder do not agree on the cash value, amount of loss or cost to repair or replace the insured property.

Contact James Judge

If you are not satisfied with the claims process, you may wish to begin the appraisal process.  James Judge is an industry in formal appraisal and can provide you with a fair and honest assessment regarding the value of your claim.  Call us at 940-648-0111 or contact us online to get started.