What Is the Appraisal Clause—and When Should You Use It?
When you’re involved in an auto insurance claim, one of the most frustrating moments can be when the insurance company values your vehicle far lower than you believe it’s worth. Whether it’s a total loss settlement or a diminished value dispute, disagreements over a vehicle’s actual cash value (ACV) are common. Fortunately, most insurance policies include a built-in protection known as the appraisal clause—a formal method for resolving valuation disputes without going to court.
Below is a clear breakdown of what the appraisal clause is, how it works, and when you should consider using it. An appraisal clause is valid on first party (policy holder) claims. As a claimant or 3rd party this is generally not an option.
What Is the Appraisal Clause?
The appraisal clause is a provision found in many auto insurance policies that allows policyholders and insurance companies to resolve disputes about a vehicle’s value. It is not the same as an appraisal report. Instead, it is a contractual dispute-resolution process designed to fairly determine the value of a vehicle when both sides can’t agree.
Here’s how it typically works:
- You and the insurance company disagree on the value of your vehicle—often after a total loss or diminished value claim.
- You invoke the appraisal clause in writing.
- Each party hires a licensed, independent appraiser to assess the vehicle.
- If the two appraisers don’t agree, they select an umpire, a neutral third party.
- Any value agreed upon by two of the three (your appraiser, their appraiser, or the umpire) becomes the binding settlement amount.
The clause was designed to prevent lawsuits, reduce delays, and ensure fairness when valuation differences arise.
What the Appraisal Clause Does Not Do:
To avoid confusion, it’s important to note that the appraisal clause:
- Does not determine fault or liability
- Does not force the insurer to pay unrelated claim amounts
- Does not guarantee a higher payout
- Does not address repair disputes (unless tied directly to valuation)
When Should You Consider Invoking the Appraisal Clause?
Invoking the appraisal clause can be an effective tool, but it’s not something you want to do prematurely. It should be used under specific conditions.
1. When the Insurance Company’s Offer Seems Too Low
If the insurer’s valuation is noticeably below market value, and your own research or an independent appraisal shows a justified higher number, the clause provides a formal method to challenge it.
This often applies to:
- Total loss settlements
- Undervalued repair-to-total calculations
- Claims where important vehicle options or condition were overlooked
2. When Negotiations Have Stalled
Before invoking the clause, you should always attempt traditional negotiation:
- Provide comparables
- Submit receipts
- Point out inaccuracies
- Request a re-evaluation
If the insurer holds firm at a number that still doesn’t reflect your vehicle’s true value, the appraisal clause becomes the next step.
3. When You Want an Objective, Third-Party Determination
Insurance company valuations are often automated and may miss key details. The appraisal clause ensures your vehicle is evaluated by:
- A human professional
- A licensed appraiser
- Someone independent from the insurer
This levels the playing field and often results in a more accurate valuation.
4. When the Dispute Justifies the Cost
Using the appraisal clause involves fees:
- Your independent appraiser
- Half of the umpire’s cost (only if needed)
5. When Critical Facts About Your Vehicle Were Ignored
If the insurer overlooked:
- Recent upgrades
- Aftermarket equipment
- Excellent condition
- Rare packages or options
- Local market adjustments
The clause allows a more thorough, evidence-based review by experts trained to recognize these details.
When You Should Not Invoke the Clause:
It may not be appropriate when:
- The difference in valuation is very small
- You lack supporting evidence
- Your vehicle has extreme wear, damage, or poor market comps
- The cost of the process exceeds potential benefit
In these cases, negotiation or accepting the offer may be more practical.
Conclusion: The Appraisal Clause Is a Powerful Consumer Protection
The appraisal clause exists to protect policyholders from undervalued settlements. When used correctly, it creates a fair, unbiased process that can significantly increase the accuracy of a total loss or diminished value payout. Before invoking it, it’s crucial to gather strong evidence—including a professional valuation—to ensure the process is worth the time and cost.
If you need help preparing for the appraisal clause or obtaining a valuation strong enough to support your position, Autopraisal can provide the detailed market evidence you need.
