An insurance appraisal is a neutral method for resolving disputes regarding claim values when the policyholder and insurance company disagree on the extent of damages or loss amount. This process involves independent appraisers evaluating the property to establish the replacement cost or actual cash value, offering an alternative to legal proceedings.

The appraisal clause should be invoked when there is a clear disagreement on the value of a claim, such as when the insurer's estimate appears insufficient or fails to account for all damages, and negotiations have reached an impasse. This process is particularly suitable for property damage claims resulting from events like storms or fires, but it is limited to disputes over valuation and not applicable to coverage denials.

In the appraisal process, both the policyholder and insurer select a competent, impartial appraiser. These two appraisers then jointly choose a neutral umpire if necessary. The appraisers inspect the damage and evaluate the loss based on evidence such as pre-loss condition and market data. They then agree on a binding award, with the majority decision prevailing. This process typically requires several weeks to months to complete.