Appraisal clauses auto insurance policies serve as a critical mechanism for resolving disputes regarding the value of a vehicle following a loss. These clauses typically outline the process by which both the insurer and the insured can agree on the fair market value of the vehicle in question. When a claim is filed, and there is a disagreement over the amount of compensation, the appraisal clause allows each party to select an independent appraiser.

These appraisers then assess the vehicle's condition and value, ultimately working together to reach a consensus. This process not only helps to expedite the resolution of claims but also ensures that both parties have a fair opportunity to present their case, thereby fostering transparency and trust in the insurance process.