What does the appraisal method involve?

The appraisal method primarily involves an external assessment of the claim value, which means that when a dispute arises regarding the value of a loss, both parties (the insurer and the insured) agree to hire independent appraisers. Each appraiser conducts an assessment and provides their evaluation of the claim value. If the appraisers cannot reach an agreement, they typically will select an umpire, and the decision made by the umpire will be binding. This method is commonly used in insurance claims, particularly for property and casualty, as it allows for an impartial evaluation of the claim by professional appraisers who have expertise in valuating damages.

While a mutual agreement between both parties is part of the appraisal process, the essence of the appraisal method is rooted in obtaining an external assessment rather than solely relying on negotiations or opinions from the involved parties. This makes the method objective, reducing bias that might arise from direct negotiations or disagreements about the value of the loss that can sometimes complicate claims.