Navigating the Complexities of Property Insurance Coverage and Claims: A Guide for Appraisers

By Thomas Dawson, ASA

Spotlighting five key areas appraisers need to know to be covered in ASA’s upcoming PP163 Property Insurance Fundamentals webinar.

In the property insurance industry, appraisers play a vital role, particularly when it comes to claims. Understanding the nuances of property insurance coverage and the claims function is essential for appraisers to effectively carry out their duties. As an Accredited Senior Appraiser and a licensed insurance broker with over ten years of real-world experience, in my forthcoming webinar, I will guide participants through the following five topics, offering a unique opportunity to deepen their understanding of property insurance fundamentals and enhance their appraisal skills.

Whether you’re a seasoned professional or new to the field, join us to gain valuable insights that will help you communicate effectively with clients and insurance professionals, interpret key insurance terminology, explain the claims function, and educate your clients about the value of a professional appraisal for insurance purposes.

1. Understanding Property Insurance Basics

Property insurance serves as a financial safety net for property owners in the event of property damage or total loss. The essence of insurance is a contract between two parties, the insured and the insurer. Understanding what constitutes a legally binding contract, as well as the obligations of each involved party, is key to explaining the value of a professional appraisal to your clients. Insurance industry terminology such as risk, premium, loss, deductibles, coverage limits, and perils are some of the fundamental concepts appraisers must grasp.

Different property insurance policies have unique features and limitations. For example, homeowners insurance covers a different set of risks than a business owners policy. Although all property insurance policies have certain elements in common, I will guide participants through the subtle yet important differences appraisers should be aware of, such as the difference between what is referred to in the insurance industry as replacement cost coverage and actual cash value coverage, general liability and professional liability, and general exclusions in property insurance policies such as inherent vice, wear and tear, and fraud.

2. The Claims Function

People buy insurance policies for protection against financial loss. When policyholders make claims under their policies, the insurer is called upon to make good on the promises they made in the policy. Policyholders, insurers, and appraisers each have distinct roles and responsibilities in the claims process. Policyholders are tasked with proving the facts of a loss, while insurers must conduct a good-faith investigation of claims, and pay valid claims in a timely manner. Appraisers bridge the gap by providing an unbiased, informed opinion of value that assists insurers in processing claims, and insureds in receiving proper compensation for their loss.

Because the policyholder is obligated to prove the facts of a loss, the value to the client in having their property appraised by an unbiased professional is of tremendous benefit in the event of a property loss claim.

3. Fundamentals of Property Appraisal for Insurance

Integrating property insurance considerations into appraisal methodologies starts with properly identifying the appraisal problem. The approach to problem identification may be the same in the context of an appraisal for charitable gift or estate tax; however, in an insurance context, appraisers are often faced with specific challenges such as evaluating a property that has already been damaged or stolen. In these situations, hypothetical conditions may be necessary. I will guide participants through problem identification and scope of work requirements specific to insurance appraisals, where the goal of the appraiser remains the same ever: credible results.

4. Navigating Disputes and Resolving Claims

Disputes often arise in property insurance claims, stemming from disagreements over coverage, property values, or the extent of damages. Appraisers can play a crucial role in resolving disputes amicably, first and foremost by providing unbiased, credible opinions of value. Helping to shape your client’s expectations around insurance by understanding property insurance fundamentals, can help avoid potential disputes before they arise. Legal considerations, such as adherence to contractual obligations, are integral to resolving contentious claims. Case studies provide valuable insights into real-world scenarios and offer precedents for handling similar disputes effectively.

5. Best Practices for Appraisers

Effective communication is paramount for appraisers when working with insurers and policyholders throughout the claims process. A basic understanding of the principles of property insurance terms and concepts can help make what is sometimes a very painful situation involving a life-changing loss no worse than it already is.

Continuing education and professional development opportunities, such as those offered by organizations like the American Society of Appraisers (ASA), enable appraisers to stay abreast of industry trends, regulatory changes, and advancements in appraisal techniques, enhancing their proficiency and credibility in the field. In ASA’s upcoming PP163 Property Insurance Fundamentals webinar, I’m looking forward to sharing my insights and real-world experience with my fellow appraisers as it relates to the insurance industry.

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Looking for a deeper dive into this topic? Register for ASA’s PP163 Property Insurance Fundamentals: What Appraisers Need to Know webinar on June 6, 2024 from 2:00-3:00 PM EDT, presented by Thomas Dawson, ASA.

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About the Author

Thomas Dawson, ASA, principle of Resonance Appraisals, has regularly bought and sold musical instruments and equipment since 1998. He has regularly appraised musical instruments, instrument collections, music collections, music equipment, music archives and archives of manuscripts and valuable papers for payment since 2017. While running a P&C insurance agency he insured millions of dollars worth of personal property including musical instruments and collections, equipment, books and manuscripts, and photographs. He became a certified commercial insurance specialist in 2016, and has quoted, written and managed thousands of insurance policies covering personal property, homes, autos, businesses and much more. An accomplished guitarist, and music producer, and music editor, he has collaborated with top music industry producers and performed with platinum-selling artists. He negotiated multiple music synchronization licensing contracts to feature his original compositions in nationally broadcast commercials. After graduating from the University of Oregon School of Music he worked as a guitar instructor for over 10 years. He has bought, sold and traded guitars and other music related property for 20 years. He has written, recorded, marketed and sold multiple physical album releases as well as digital releases. He has been a royalty collecting member of ASCAP (American Society of Composers, Authors and Publishers) as a music creator, and publishing company owner since 2008.