How is the term property appraisal used in insurance?

The term property appraisal in insurance is primarily used to estimate property value for insurance coverage. This process involves assessing the worth of an insured property to ensure that adequate coverage is provided in the event of a loss. Accurate appraisals are essential because they help in determining how much insurance a policyholder should purchase to fully protect against potential losses. If the property is undervalued, the insured may not receive sufficient compensation to cover damages or loss, leading to financial strain when claims arise.

In contrast, assessing credit risk, calculating business revenue, or determining staff adequacy are not functions of a property appraisal in the insurance context. These activities relate to different aspects of a business's performance and risk assessment but do not directly influence the valuation of physical assets for insurance purposes.