What is the purpose of an appraisal in property insurance?

The purpose of an appraisal in property insurance is primarily to determine the value of the property. This process is essential in the event of a dispute regarding the amount of a loss that has occurred or during the settlement of a claim. When an insured property sustains damage, an accurate assessment of its value is crucial to ensure that the policyholder receives an appropriate compensation amount that reflects the true worth of the property at the time of the loss.

In property insurance, appraisal clauses are often included in policies to provide a clear method for resolving disagreements about the value of the property or the amount of loss. This helps streamline the claims process and provides both parties (the insurer and the insured) with a structured approach to arriving at an equitable resolution.

While the other options touch on various elements related to property insurance, they do not accurately encompass the specific function of an appraisal. Assessing risks for underwriting is more about evaluating the likelihood of future claims and setting appropriate premiums. Calculating potential loss from theft pertains to a specific type of risk assessment rather than property valuation. Providing a history of past claims may be relevant for understanding an individual’s insurance experience but does not relate to the appraisal process itself.