Managing Reserves During an Ongoing Appraisal

Browse the full Resources Index

Reserves generally refer to the funds an insurance carrier sets aside to cover the estimated cost of an open claim, and managing these reserves appropriately during an ongoing appraisal is a routine part of the carrier’s internal claims process.

While a claim is in appraisal, carriers typically maintain a reserve reflecting their best estimate of the likely outcome, which may be adjusted as new information becomes available during the appraisal process.

Reserve management during appraisal is generally an internal financial and accounting function for the carrier, separate from the actual evaluation of the loss being conducted by the appraisers and, if needed, the umpire.

Once an appraisal award is reached, the carrier typically adjusts its reserve and processes payment based on the final award amount and the applicable policy terms, such as deductibles or coverage limits.

This reserve process is largely an internal carrier matter and generally does not affect the independent, fact based evaluation appraisers and umpires are expected to conduct during the appraisal itself.

General education only: the appraisal process described here can vary by state and policy language, and nothing in this article is legal advice. If you have questions about a specific claim, review your policy language and talk with the insurance company or an attorney familiar with your state’s laws.

Russ Lis is a working property insurance appraiser and umpire based in Minnesota, serving clients nationwide. Have a question about your own claim? Contact Appraisal Resolution.