The Homeowners Guide to Home Appraisal for Insurance Purposes

Jacklyn Walters
Written by
Jacklyn Walters
Icon of a woman
Written by
Jacklyn Walters
Insurance Writer
Jacklyn Walters is a personal finance writer. She has a bachelor's degree from SUNY-Buffalo and specializes in home insurance, striving to help customers make informed decisions about their insurance policies.
John Leach
Edited by
John Leach
Photo of an Insurify author
Edited by
John Leach
Insurance Content Editor at Insurify
John Leach is an insurance content editor who has worked in print and online. He has years of experience in car and home insurance and strives to make these topics easy to understand for everyone. He has a linguistics degree from UC Santa Barbara.

Updated June 4, 2021

Reading time: 5 minutes

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Why you can trust Insurify

Insurify is America's highest-rated insurance comparison platform. We partner with the nation's top insurance companies and are licensed as an agent in all 50 states. However, the insurance experts writing our content operate independently of our partners, and you can learn more about how we make money by viewing our advertising disclosures. Also check out reviews from over 3,000 satisfied customers, our data methodology, and our editorial standards.

Most homeowners are familiar with appraisal––it’s how you know the value of your home before you purchase it. But your home’s value isn’t set in stone; it fluctuates based on a range of factors, including the housing market, the value of other homes in your neighborhood, and any home improvements or additions you’ve made. And when it comes to home insurance, appraisal has a slightly different meaning.

Your homeowners insurance policy provides protection for property damage from perils like natural disasters and theft, and the appraisal process tells your insurance company just how much coverage you’ll need in case of property loss. But your home’s market value appraisal is only the beginning of your property valuation. If your belongings are ever damaged by a storm or burglary, your insurance provider will need to know the total property value of your real estate and personal belongings.

Whether you’re trying to calculate the replacement cost of damaged belongings or you’ve found yourself in a dispute with your insurer, appraisal helps ensure that you’ll receive the correct amount of reimbursement.

If the homeowners insurance appraisal process leaves you feeling less than satisfied with your current insurance coverage, use Insurify’s home insurance quote comparison to find the best insurance company, coverage, and cost in just a few minutes.

Purchase Appraisal vs. Insurance Appraisal

Before you purchased your home, a licensed appraiser calculated what is known as the “fair market value” of the property. This figure determines how much a home should be sold for and allows potential buyers and mortgage lenders to know the actual value of the real estate.

This appraisal is known as the purchase appraisal (since it determines the value of the home at the time of purchase). These appraisals are—generally—only conducted when a homeowner is selling or refinancing their home.

While your home’s purchase appraisal will affect your home insurance rates—since home insurance premiums are based on the value of your home —these appraisals are different from homeowners insurance appraisals.

Homeowners insurance appraisals are requested by either an insurance provider or policyholder amid the insurance claims process. If the insurer and the insured disagree about the replacement cost or actual cash value of the policyholder ’s damaged items, independent appraisers and an umpire work together to determine the amount of the loss.

These appraisals typically involve a home inspection and seek to find the combined value of your home, property, and personal belongings to determine their total cost of repair or replacement.

How Homeowners Insurance Appraisal Works

Natural disasters and home intruders can leave your home, property, and belongings in shambles in a matter of minutes. After experiencing property damage, no matter how severe, it can be challenging to determine just how much it will cost to repair your home or replace your possessions.

If you’ve previously submitted a home inventory to your insurance provider, the claims process is a bit easier. But your insurer may still dispute your projected repair costs, or you may disagree with your insurer ’s proposed reimbursement amount.

When you (or your insurer ) feel like you’re getting the short end of the stick when it comes to your reimbursement, it may feel like legal action is the only way to settle things. But lawsuits can leave both parties paying for expensive legal fees, not to mention the process can take months or even years.

Luckily, you don’t need to involve any law firms in your insurance dispute, because home insurance policies include what is known as an appraisal clause. The appraisal clause essentially allows you and your insurance provider to settle disputes while bypassing the judiciary process.

Most appraisal clauses allow either party (you or your insurance company ) to invoke the clause in writing in case of an insurance claim disagreement. After someone calls for appraisal, you and your insurer each choose an appraiser to calculate the value of the loss. The two chosen appraisers then choose an umpire who acts as a third-party mediator if the appraisers cannot agree on the amount of the loss.

Then, the appraisers do what they do best––appraise. Each party will go through and analyze the damage to your home, determining the actual cash value or replacement cost and the amount of loss for all affected items and property. When the appraisers come to an agreement on the cost of the damages (or after the umpire settles any disagreements between the appraisers ), your insurance provider will reimburse you for the appraisers ’ agreed-upon amount.

Keep in mind that the amount of your reimbursement depends on the type of policy you have.

Actual cash value policies allow policyholders to collect compensation only for the value of their items prior to being damaged. Let’s say you purchased a laptop for $2,000 four years ago, and its expected lifespan was five years. If an intruder breaks into your home and damages your laptop, your insurance company will only reimburse you for $400 since the value of your laptop has depreciated by $1,600 ($400 per year) since you purchased it.

Replacement cost coverage, on the other hand, requires your insurance provider to reimburse you for the recoverable depreciation.&text=So%20if%20this%20roof%20is,by%20%241%2C500%20before%20the%20damage.) of your damaged items. This means that if you had a replacement cost policy in the above scenario, your insurer would pay for the actual cash value of the laptop ($400) along with the depreciated value ($1,600). That way, you will have the full $2,000 to replace your broken laptop, hence the term “ replacement cost coverage.”

Everything to Know About the Appraisal Clause

Appraisal clauses differ by insurance company, and it’s im portant to read over the appraisal clause in your specific policy to understand your options and limitations. Still, every appraisal clause includes a general breakdown of the steps you and your insurer will take when invoking the appraisal process.

The first few sentences explain in what situation you can invoke appraisal, who can do this, and how to go about the request. Then come the next steps you are required to take (find an appraiser, who will then find an umpire ) and any stipulations regarding this process. Next, the appraisers decide on the amount of loss, which determines the insurance reimbursement.

As helpful as the appraisal clause can be for policyholders seeking an accurate valuation of their belongings, invoking the appraisal clause isn’t always the answer.

If you and your insurer disagree on items that were stolen, for instance, an appraisal is most likely not going to resolve your dispute. In fact, it may even send you into a lawsuit. Various court cases (including Safeco Insurance Company of America v. Sharma and Kacha v. Allstate Ins. Co. ) have determined that appraisers are not qualified to determine whether a policyholder owned the items they claim have been stolen.

You should also recognize that appraisal, while a much cheaper option than litigation, is still going to cost you. Most appraisal clauses state that each party (you and your insurance provider ) is required to pay for their chosen appraiser and that both parties will split the cost of the appraisers ’ selected umpire.

As you can see, your home insurance policy ’s appraisal clause is there to provide you and your insurer an option outside of legal action to settle insurance claim disputes. But the clause is best used in situations where your disagreement is solely about the value of your property damage rather than disagreements over whether you owned items you’ve claimed as stolen.

If you still have questions, we get it: appraisal is a complicated process. That’s why Insurify compiled answers to some of homeowners ’ most frequently asked insurance appraisal questions.

Frequently Asked Questions

  • If you recently purchased your home, your purchase appraisal will help your insurer know how much coverage you need. If you’ve lived in your home for a long time and are looking for a new homeowners policy or if you recently purchased an old house, your insurer may require a home inspection to determine the state of the home. Often, if an insurance company requires an appraisal or home inspection before you can purchase a policy, the company will send an appraiser to evaluate your home (so you don’t have to worry about finding or paying someone). Additionally, if you’ve made additions or improvements to your home, an appraisal can ensure that you still have the necessary coverage for your newly renovated home.

  • No, appraisals can only settle disputes about the value of property damage or the amount necessary to fix the damages. Any disagreements you and your insurer have about your home insurance policy’s coverage will need to be settled through litigation.

  • No, once you or your insurer invoke the appraisal clause, there’s no turning back. Once the two appraisers or umpire decides on the amount of loss, that is the amount your insurer must reimburse.

Homeowners Insurance Appraisal: The Bottom Line

After facing property damage, the last thing you want is to disagree on how much money you need from your insurance agency to fix your damaged home. Homeowners insurance appraisal can help settle these disputes quickly and allows you and your insurer to bypass the complicated and costly legal process. And if the claims or appraisal process leaves you feeling frustrated and underwhelmed with your home insurance coverage, use Insurify to compare new insurance companies and coverage options to find the perfect policy for you in just a few minutes.

Use Insurify to compare home insurance quotes for your property in your area.

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Jacklyn Walters
Written by
Jacklyn Walters

Insurance Writer

Jacklyn Walters is a personal finance writer. She has a bachelor's degree from SUNY-Buffalo and specializes in home insurance, striving to help customers make informed decisions about their insurance policies.

Learn More
John Leach
Edited by
John Leach

Insurance Content Editor at Insurify

Photo of an Insurify author
Edited by
John Leach
Insurance Content Editor at Insurify
John Leach is an insurance content editor who has worked in print and online. He has years of experience in car and home insurance and strives to make these topics easy to understand for everyone. He has a linguistics degree from UC Santa Barbara.