What is an Appraisal Clause?

The appraisal clause is a little known, yet very powerful, tool that is included in most insurance policies. If your vehicle is totaled or stolen, and the insurance company offers you a payout that seems too low, the appraisal clause can be invoked making it much more likely that you will get a fair settlement. It gives you a way to dispute their valuation without hiring an attorney or going to court. It’s a highly effective method of protecting yourself from being lowballed.

Here is an example of a typical appraisal clause:

You’re not alone. The appraisal clause often gets buried in the fine print, under sections like “Loss Settlement,” “Dispute Resolution,” or “Right to Appraisal.” This clause allows you to request an independent review of your vehicle’s value by a qualified appraiser if you and your insurance company disagree. Most people only discover it after they’ve been lowballed on their claim, but knowing about it ahead of time is like having a secret weapon, you’ll be ready to use it when you need it most.

Here’s how the appraisal clause process generally works, step by step

If you and your insurer can’t agree on the value of your claim, either you or the insurance company can trigger the appraisal clause. To do this, you will need to notify your insurer in writing. A simple email to your adjuster or a message in the claims portal will do the trick, but make sure it includes the magic words:

At this point, it’s important to follow up to ensure that they acknowledge your request in writing. Give them a few days to acknowledge that the appraisal clause has been invoked. This will make sure that everyone is on the same page.

When it comes to selecting an independent appraiser for the appraisal clause process, not all appraisers are created equal. Each party, both you and the insurance company, will choose an appraiser to represent your interests.

Choosing the right appraiser can make a significant difference in the final payout of your claim. At Fair Auto Appraisals, I conduct thorough, USPAP-compliant appraisals that ensure a fair and accurate valuation of your vehicle. My reports typically include a detailed valuation methodology, a minimum of three comparables, and precise adjustments for factors like mileage, condition, and location. I also carefully scrutinize the insurance company appraiser’s report to dispute any inaccuracies, such as the use of poor comparables or misleading adjustments for “rust belt” vehicles.

While the appraisal itself provides a basis for valuation, it’s my negotiations that are designed to secure the highest possible payout for you. If you’re curious why my success-based fee structure works in your favor and motivates me to maximize your payout, check out this article: Why My Success-Based Fee Structure Ensures You Get the Highest Payout Possible. You’ll understand why I’m as invested as you are in fighting for every dollar you’re entitled to.

Ultimately, I aim to represent your best interests in the process and ensure that the appraisal is done fairly.

Now, both appraisers independently assess the value of your vehicle. They’ll take the facts into account, review the comparables, and use their expertise to come up with a fair value. At this point, if both appraisers agree on the value of your vehicle, that’s the end of it! The insurance company is required to pay you the agreed-upon amount, and the dispute is resolved.

If you’ve chosen Fair Auto Appraisals LLC, rest assured we’ll carefully review every detail of the opposing appraiser’s report. If we find poor comparables or inappropriate valuation adjustments, we will dispute them on your behalf. This way, we make sure the value assigned to your car truly reflects what it’s worth.

Of course, sometimes things don’t go smoothly. If the two appraisers can’t agree on a number, they’ll bring in an impartial umpire. The umpire’s job is to review both appraisals, hear both sides of the argument, and make a final decision. If the umpire agrees with one of the appraisers, that value becomes the final, binding settlement. At that point, the insurance company has to pay that amount.

Once a final value is decided, either through agreement between the appraisers or by the umpire, the insurance company has to pay you that amount within a reasonable timeframe. No more back-and-forth, no more hassle, just a fair payout.

One thing many people don’t realize is that most insurance companies will pay out the undisputed portion of your claim while the appraisal clause process is underway. For example, if the insurer offers $10,000 and you believe your loss is worth $15,000, they can pay the $10,000 now while you settle the rest through the appraisal process.

To request this, you can use a simple message like this:

Subject: Request for Payment of Undisputed Amount – Claim #[Your Claim Number]

Hi [Adjuster’s Name],

As we continue with the appraisal clause process, could you please process payment of the undisputed amount of my claim? This will help ease the financial burden while we finalize the valuation. Thank you!

Sincerely,
[Your Name]

This keeps the process moving and gets you funds faster while resolving the dispute.

The timeline for resolving a claim through the appraisal clause process can vary, but typically it moves much faster than dragging things through court. Here’s a general breakdown of what you can expect:

Once you officially invoke the appraisal clause, the insurance company typically takes about a few days to acknowledge it. This acknowledgment confirms that your request is being processed.

After acknowledging your invocation, the insurance company will work on hiring their appraiser. This process generally takes an additional 1-2 weeks, during which they will also provide me with their appraiser’s contact information.

After I receive the contact information for the insurance company’s appraiser, it generally takes an additional 1-2 weeks for both appraisers to complete their evaluations, exchange reports, and attempt to reach an agreement. During this stage, there may be back-and-forth negotiations as we each review the comparables, adjustments, and methodologies used.

If the two appraisers can’t come to an agreement on their own, we’ll appoint an impartial umpire, which is needed in less than 10% of cases. While this can add some time to the process, the majority of cases are resolved within the initial 2-4 week period without the need for an umpire. If an umpire is required, it could take another 1-2 weeks for them to make a final decision.

Not every insurance policy includes an appraisal clause, but that doesn’t mean you’re out of options. If your policy doesn’t have this provision, here are a few ways you can still fight back against a low offer:

Take the time to comb through your insurance policy thoroughly. There may be other provisions that can help you in disputing a low valuation, even if an appraisal clause isn’t explicitly mentioned. 

Don’t assume the insurance company’s first offer is their best. A well-prepared, independent appraisal (like the ones I provide at Fair Auto Appraisals) can give you the leverage you need to negotiate a fair settlement. Additionally, sometimes obtaining a second independent appraisal that corroborates the first can strengthen your position. While the total cost of appraisals might approach $1,000, the resulting increase in your settlement can often be well worth the investment.

If you believe your insurer is acting unfairly or lowballing your claim in bad faith, you have the option to file a complaint with your state’s insurance department. This can trigger an investigation and potentially help you get the payout you deserve.

If you’ve hit a wall with the insurance company, you may want to consult with an attorney who specializes in insurance claims. They can help you explore your options, including whether small claims court might be a path worth pursuing.

The appraisal clause isn’t just a tool; it’s your best defense against unfair lowball offers. Insurance companies might undervalue your vehicle, but you have the right to challenge their offer. The appraisal clause empowers you to secure a fair valuation without the stress and cost of lengthy legal battles.

By invoking the appraisal clause, you bypass the hassle of court, avoid attorney fees, and skip the drawn-out process of litigation, which can take months or even years. Instead, you get a fast, straightforward solution that ensures a fair settlement, saving you time, money, and frustration.

One of the key risks of invoking the appraisal clause is that the result is binding, meaning both you and the insurance company must accept the final valuation, even if it doesn’t meet your expectations. Although I fight hard to secure a fair valuation, the outcome is ultimately determined by myself and the insurance company’s appraiser. If we cannot agree on a value, a third umpire appraiser will step in to make the final decision.

Once the appraisal process is complete, the decision is final and cannot be appealed or renegotiated. While I will work hard to advocate for your best interests, there is always a chance that the final valuation may fall short of what you hoped for. It’s important to weigh this risk carefully before moving forward, as the outcome is binding and could limit your ability to seek further compensation.