Resources
Glossary
Key terms and definitions related to property insurance appraisals, damage valuation, and dispute resolution.
Insurance & Policy Terms
Appraisal Clause
A provision in property insurance policies that establishes the process for resolving disputes over the amount of loss. When the insured and insurer disagree on the value of covered damage, either party can invoke this clause to have independent appraisers and a neutral umpire determine the binding amount.
Deductible
The amount a policyholder must pay out of pocket before insurance coverage begins. Deductibles are subtracted from the total loss amount when calculating the insurer's payment obligation.
Coverage Limit
The maximum amount an insurance policy will pay for a covered loss. Claims exceeding this limit are the policyholder's responsibility.
ACV (Actual Cash Value)
A method of valuing property damage that accounts for depreciation. ACV equals the replacement cost minus depreciation based on the age and condition of the damaged property.
RCV (Replacement Cost Value)
The full cost to repair or replace damaged property without deduction for depreciation. RCV policies pay the actual cost of repairs or replacement, up to the policy limit.
Policy Period
The span of time during which an insurance policy is in effect. Coverage applies to losses that occur during this period, regardless of when the claim is reported.
Appraisal Process Terms
Appraisal Demand
A written notice sent by either the insured or insurer invoking the appraisal clause and formally beginning the appraisal process. The demand specifies the items in dispute and the amount of loss in question.
Appraiser (Appraisal)
An independent professional appointed by either the insured or the insurer to estimate the amount of property damage and the cost to repair or replace the damaged property. Must be 'competent and disinterested' as required by the appraisal clause.
Disinterested
A requirement in appraisal clauses meaning the appraiser must have no direct financial interest in the outcome beyond their professional fee. An appraiser with a contingency interest or prior involvement in the claim may be challenged as not sufficiently disinterested.
Umpire
A neutral third party selected jointly by the two appointed appraisers. The umpire reviews items on which the appraisers cannot agree, conducts independent inspections if warranted, and issues a binding decision on disputed items.
Binding Award
The final determination of the amount of loss issued by the appraisers and umpire. A binding award is enforceable under Texas law and resolves the appraisal dispute.
Amount of Loss
The dollar value of damage covered by the insurance policy. This is what the appraisal process determines and includes the cost of repairs or replacement, minus applicable depreciation and subject to policy limits, deductibles, and coverage exclusions.
Scope of Loss
A comprehensive list and description of all damage caused by a covered loss, including labor, materials, and necessary supplemental repairs. The scope forms the basis for the cost estimate.
Property Damage & Valuation Terms
Depreciation
A reduction in the replacement cost of property based on age, condition, and wear. Used in ACV calculations to account for the fact that used or aged property is worth less than new property.
Supplemental Damage
Additional damage discovered during the repair process that was not identified in the original estimate. Supplemental claims are common in property damage cases and often require appraisal or negotiation.
Mitigation
Steps taken to prevent further damage after an insured loss occurs. Insurance policies typically require policyholders to take reasonable steps to mitigate damages.
Replacement Cost
The cost to repair or replace damaged property with materials of like kind and quality at current market prices. Used in RCV policies and as the baseline before deductions for depreciation.
Market Value
The price at which a property would sell in an open market under normal conditions. Used in some valuations but distinct from replacement cost.
Line Item
An individual entry in an estimate or appraisal detailing a specific repair, replacement, or service with associated cost. Detailed line-item estimates are standard in professional appraisals.
Overhead & Profit (O&P)
A percentage added to material and labor costs to account for business overhead, profit, and general conditions. Typical range is 15-25% depending on the scope and complexity of the work.
Professional Roles & Credentials
Licensed Appraiser
A professional who holds a state license (in Texas, issued by the Texas Department of Insurance) to conduct property damage appraisals and testify as an expert in appraisal disputes.
Xactimate
Industry-standard software used to document property damage, organize scope of loss, and generate detailed cost estimates. Most professional appraisers use Xactimate for consistency and documentation.
Public Adjuster
A licensed professional who represents policyholders in insurance claims. Public adjusters help document damages, negotiate with insurers, and ensure fair settlement. They typically work on a contingency fee (percentage of recovered settlement).
Insurance Adjuster
A professional hired by an insurance company to investigate, document, and evaluate insurance claims. Adjusters work on behalf of the carrier and help determine the amount to be paid under the policy.
Independent Adjuster
A licensed claims professional who works independently, often hired by insurers to adjust claims. May serve either carriers or policyholders depending on the engagement.
IAUA (Independent American Underwriters Association)
A professional organization for independent insurance adjusters and appraisers. Members are bound to a code of ethics and professional standards.
CPIA (Certified Property Insurance Appraiser)
A professional credential issued by IAUA to property insurance appraisers who meet education, experience, and ethics requirements. CPIA holders are bound to the highest industry standards.
Dispute Resolution Terms
Dispute
A disagreement between an insured and insurer over the amount of loss from a covered event. The appraisal clause provides a process to resolve disputes without litigation.
Mediation
A structured negotiation process facilitated by a neutral third party. Parties work together to reach a mutually acceptable settlement before proceeding to appraisal or litigation.
Litigation
A court-based dispute resolution process where parties present evidence and arguments to a judge or jury. Litigation is typically more time-consuming and expensive than appraisal.
Bad Faith
Conduct by an insurer that violates the implied covenant of good faith and fair dealing in insurance contracts. Examples include unreasonable claim denial or failure to pay valid claims.
Coverage
Protection provided under an insurance policy for specified types of losses. Whether a particular loss is covered depends on the policy language, exclusions, and the nature of the loss.
Claim
A formal request for payment under an insurance policy following an insured loss. The claim process typically involves notice, investigation, documentation, and negotiation.
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