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.

  1. Third Party

    An individual or entity that is involved in a transaction but ...
  2. Insurance Claim

    A formal request to an insurance company asking for a payment ...
  3. Adjuster

    An insurance claims agent. A claims adjuster is charged with ...
  4. Arbitration

    An informal hearing regarding a dispute. The dispute is judged ...
  5. Judgment

    A court order to the loser of a lawsuit to pay the winner a specified ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. Investing Basics

    How To Handle A Serious Dispute With Your Broker

    Find out what to do if you have a dispute with your broker.
  2. Insurance

    Will Filing An Insurance Claim Raise Your Rates?

    An accident can mean higher insurance costs - even if it wasn't your fault.
  3. Insurance

    Selecting And Managing Insurance Payouts

    Find out which settlement option is right for you before you recieve your funds.
  4. Brokers

    Deal Effectively With Difficult Clients

    Learn how to tame the most shrewish clients with these simple methods.
  5. Options & Futures

    The End Of Consumer Arbitration

    In light of recent court cases, arbitration may be on its way out.
  6. Investing

    When A Dispute With Your Broker Calls For Arbitration

    Do you have a claim you'd like to file? We'll take you through this process step by step.
  7. Insurance

    Avoiding The Modified Endowment Contract Trap

    To avoid MEC status, flexible-premium policies must cap the amount that can be paid into the policy over a period of seven years.
  8. Economics

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  9. Economics

    How Does Reinsurance Work?

    Reinsurance is a practice in which insurers transfer portions of portfolios to other parties in order to reduce their exposure to claims.
  10. Insurance

    Understanding Insurance Claims

    An insurance claim is a formal request made to an insurance company that asks for a payment based on the terms of the policy.
  1. Does renters insurance cover personal injuries?

    Renters insurance provides two main forms of coverage – liability and contents insurance – and they are offered together ... Read Full Answer >>
  2. Does renters insurance cover jewelry?

    Renters insurance provides personal property coverage that covers your personal property – including jewelry – in case of ... Read Full Answer >>
  3. Why might landlords require renters insurance?

    Landlords can require renters insurance to lower their own liability and insurance costs. According to data from the Insurance ... Read Full Answer >>
  4. What is the expense ratio in the insurance industry?

    The expense ratio in the insurance industry is a measure of profitability calculated by dividing the expenses associated ... Read Full Answer >>
  5. What is the difference between a peril and a hazard?

    The two related terms "peril" and "hazard" are often used in reference to the insurance industry. Essentially, a peril is ... Read Full Answer >>
  6. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center