Umpire Clause

DEFINITION of 'Umpire Clause'

The language in an insurance policy that provides for a means of resolution by an unbiased third party if an insurer and an insured cannot agree on the amount of a claim payment. An umpire clause is the same thing as an arbitration clause. The arbitration process requires both the insurance company and the policy holder to hire an appraiser of their choosing to assess the damages and the cost to repair them. The umpire will agree with one or perhaps both of the resulting appraisals and that amount will be used to satisfy the claim.

BREAKING DOWN 'Umpire Clause'

For example, let's say Sheldon has a car accident and his car is totaled. He is at fault, so he files a first-party claim with his own insurance company. The insurer determines that the value of his totaled vehicle is $10,000 and offers to pay him the $10,000 minus his $1,000 collision deductible. According to his research, Sheldon believes the value of his car to be closer to $15,000. Since they are so far apart, Sheldon and his insurer agree to invoke the policy's umpire clause and have a neutral third party and appraisers determine the value of the car.

RELATED TERMS
  1. Valuation Clause

    A provision in certain insurance policies that specifies the ...
  2. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
  3. Waiver Of Inventory Clause

    A clause in an insurance policy that says that the insurance ...
  4. Cancellation Provision Clause

    It is a provision in an insurance policy that permits an insurer ...
  5. Abandonment Clause

    A clause in a property insurance contract that, under certain ...
  6. Insurance Claim

    A formal request to an insurance company asking for a payment ...
Related Articles
  1. Personal Finance

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  2. Personal Finance

    Soon, You Can Sue Your Bank Again

    Americans are going to regain the right to sue a bank or credit card company – but not in all cases. We explain what changes and what doesn't.
  3. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  4. Personal Finance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  5. Investing

    The Industry Handbook: The Insurance Industry

    As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the simplest terms, insurance of ...
  6. Personal Finance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  7. Personal Finance

    5 Car Insurance Add-Ons You Don't (Always) Need

    We'll look at the types of car insurance that you can avoid to save some money on your monthly premium.
  8. Personal Finance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  9. Personal Finance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  10. Personal Finance

    10 Car Insurance Myths

    Things that are believed to raise insurance premium rates, rental car insurance, etc.
RELATED FAQS
  1. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  2. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  3. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Answer >>
  4. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. How does the insurance sector work?

    Learn more about the insurance sector, a historically safe place for equity investors and the home of some of the largest ... Read Answer >>
Trading Center