What primary function does a property appraisal serve?

The primary function of a property appraisal is to assess property value for insurance coverage. This evaluation is crucial as it informs both the insurer and the insured about the value of the property being covered. Accurate appraisal ensures that adequate coverage is provided in the event of a loss. Insurance companies rely on these appraisals to determine premium rates and to establish the extent of coverage needed for different types of properties, whether residential, commercial, or industrial.

While determining rental prices might be a byproduct of understanding property value and market trends can inform buyers and sellers about the current real estate climate, neither of these functions constitutes the primary purpose of a property appraisal. Evaluating property for environmental impact, although significant in certain contexts, is distinctly separate from the valuation process that appraisals focus on, which is primarily concerned with the financial or replacement value of the property for the purpose of insurance.