What is the purpose of an appraisal clause in an insurance policy?

The purpose of an appraisal clause in an insurance policy is to provide a method for resolving disputes over the amount of a loss. This clause is particularly important in the claims process, as it establishes a procedure where both the insurer and the insured can mutually select appraisers to assess the extent of the damage or loss. If the appraisers cannot agree on a value, the clause often allows for the appointment of an umpire to make a final determination. This process helps streamline the resolution of disagreements regarding the monetary aspects of a claim and aims to ensure fairness for both parties involved in the insurance contract.

In contrast, increasing the overall policy limit or limiting the types of claims allowed are not functions of the appraisal clause but rather pertain to the terms and conditions set in the policy itself. Similarly, while the appraisal process might incidentally affect the speed of the claims process, that is not its primary objective; the main goal is to settle disputes specifically about the valuation of the loss.