Mandatory Appraisal Process Beginning 2026
In 2025, the Texas Legislature passed Senate Bill 458, a significant reform that mandates all personal auto and residential property insurance policies in Texas include a binding appraisal clause, restoring a key consumer protection tool. The law requires personal auto and residential property policies to have an appraisal provision to resolve disputes about the loss amount, effective September 1, 2025, and applies to forms issued or renewed after January 1, 2026.
Why the Reform Was Necessary
Lawmakers acted after reports surfaced that some personal auto insurers had removed the appraisal process for partial losses, despite its longstanding use in the industry. In 2015, one of the largest personal auto insurance carriers successfully filed and removed the appraisal process from policies for partial vehicle loss, and without clear statutory requirements, state regulators lacked the authority to mandate access to appraisal.
How the Process Works
Each party selects an appraiser—one for the policyholder and one for the insurer. The appraisers inspect the damage and try to agree on the value of the loss. If they can't agree, they select a neutral umpire to make the final decision. The resulting appraisal award is binding on both parties except in situations involving fraud, accident, or a material mistake.
Benefits for Homeowners
Research shows appraisal decisions often favor policyholders, bumping up payouts by around 40%, potentially putting thousands of dollars back in homeowners' pockets. The new rules provide transparency with standards set by the Texas Insurance Commissioner, creating a faster alternative to litigation.
Implementation Details
The Texas Commissioner of Insurance is tasked with adopting rules necessary to implement the new chapter, including setting deadlines for completing appraisals and requiring appraisals in cases of total loss or significant damage. The law applies broadly to policies issued by various insurers but does not apply to commercial insurance policies or policies issued by the Texas Windstorm Insurance Association.
This reform fundamentally reshapes how Texas homeowners resolve insurance disputes, shifting power away from insurers who previously controlled whether to offer appraisal provisions. The mandatory process levels the playing field and provides a standardized, fair mechanism for resolving claim amount disagreements without costly litigation.