What does an appraisal clause in an insurance policy allow both parties to do?

An appraisal clause in an insurance policy serves a crucial role in the claims process, specifically when the insured and the insurer cannot agree on the amount of a loss. This clause ensures that both parties have a structured method for resolving disputes regarding the valuation of a claim. If there is a disagreement over the claim amount, the appraisal clause allows each party to appoint their own appraiser. These appraisers will then work to determine the value of the loss independently. If the appraisers do not come to a consensus, they can choose an impartial umpire to assist in reaching an agreement. This collaborative approach helps facilitate resolution in a fair manner, ultimately allowing both parties to move forward with a clear understanding of the claim's value.

By utilizing this process, the appraisal clause helps maintain the integrity of the policy and provides a built-in mechanism for conflict resolution without resorting to litigation, making it a vital component in the insurance landscape.