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How To Get Overhead & Profit From an Insurance Claim

There seems to be a lot of misconceptions about getting overhead and profit covered on roofing insurance claims.

Can roofers get overhead and profit on every insurance claim? The real answer is “no” and it shouldn’t be expected. However, it shouldn’t be so tricky getting overhead and profit from insurance carriers when you should get it.

What is Overhead and Profit (O&P)?

You might be asking, “What is O&P and why should I care?” O&P is overhead and profit.

In construction, overhead is all the expenses related to operating the business in addition to the labor and material costs directly related to individual projects. Profit is the money every business needs to make in order to stay in business long term.

Do Insurance Companies Have to Pay Overhead and Profit?

The short answer is “no” - insurance companies do not have to pay O&P. However, there are ways to make a strong case for it and making a strong case starts with knowing how insurance companies dispute O&P.

Reasons Insurance Carriers Deny O&P Claims

It can be confusing and frustrating when a claim or supplement isn’t approved. Some of the most common reasons O&P claims are denied approval are the following:

Three-Trade Rule

According to insurance carriers, there is a three-trade rule of thumb for insurance carriers that basically means unless a claim involves three or more trades it doesn’t qualify for O&P approval.

Being a roofing business that also does gutters and siding doesn’t automatically qualify you for O&P either. To the insurance adjuster, you’re still one business that does all the work “in-house” and that will be used to dispute your claims for O&P.

Complexity of the Project

With or without the three-trade rule satisfied, the project might not be complex enough for the adjuster to consider the job qualified for O&P.

When the reasons for disputing a claim become this vague it is important to remain calm and build a credible case by knowing the facts and proving just how complex the job really is.

Roofers Don’t Count

This is one of our favorites. It might sound like a playground insult but it is an actual reason adjusters can use to dispute O&P.

We encourage all roofers to actually be general contractors even if that means changing the name of the business or adding a word like “restoration” to your business name. Sometimes it is the only way to overcome the “roofers don’t count” dispute.

Construction Overhead Costs

This is not an extensive list but one that makes the point that overhead costs for roofers and general contractors adds up to quite a lot:

  • Trucks & Fuel

  • Office & Warehouse Space

  • Office Supplies & Tools

  • Software Subscriptions

  • Administrative & Sales Staff

  • Marketing & Advertising

  • Training

  • Insurance - General Liability & Workers Compensation

All of those are real expenses that have to be accounted for or the business will not survive. We say it all the time - you have to know your numbers. You have to get a good grip on all these expenses to know how to calculate overhead and profit in construction.

It is always better to look at everything through the eyes of the insurance adjuster. We say this all the time. Insurance adjusters look at all the numbers through the lens of Xactimate, so you should too.

Overhead and Profit - Xactimate by Xactware

The Xactimate software “is not designed to provide full detail on all costs that are incurred,” per their white paper published in 2020. However, it is designed to make clear distinctions for overhead as:

  • General Overhead

  • Job-Related Overhead

  • Job-Personnel Overhead

The easiest way to think of it is General Overhead is more about the business, usually only the General Contractor, making O&P as a markup on the overall project, and job-related and job-personnel overhead are more about the subcontractors or trades making profit by line item designations.

There’s more to it than that but we’ll leave it at that for the sake of simplicity here.

It is important to know how to use the Xactimate software correctly for the way it was designed to distinguish between those three types of overhead and the way it factors in Retail Labor Rates and other variables. Knowing the software and using it well can make all the difference in whether or not a claim or O&P supplement will be approved or denied.

Overhead and Profit Calculation

It is up to every roofer or general contractor to determine what their overall overhead and profit percentages should be and then work the estimating and production processes out accordingly.

To find the overhead percentage, divide the total sum of annual overhead by the total sales projected for the year. The profit percentage is the margin you want to realistically make on top of all direct and overhead costs.

For insurance claims work, the general contractor overhead and profit rule of thumb to follow is 10% overhead + 10% profit on top of the direct costs of the job.

When Should Insurance Pay Overhead and Profit?

The reason this is a good question is because it ignores the lie that roofers should always expect to get O&P. That is a common misconception being taught in the industry.

The simple fact of the matter is that insurance carriers are not always going to approve O&P. Even if there are multiple trades involved.

Ways General Contractors Make Sure to Get Overhead and Profit

When it is clear the criteria for O&P are met, and when it is appropriate to pursue it, there are things every contractor can do to ensure it will be approved.

Be a General Contractor

This can’t be overemphasized. If the name of your company is “ABC Roofing” we recommend making it “ABC Roofing & Contracting” or “ABC Roofing & Restoration.” Make it anything that will provide you a strong response to the “you’re just a roofer” dispute.

Educate the Homeowner

As soon as you make contact with the homeowner, explain literally everything to them. The goal is to make them your ally immediately. You’re their guide through the process.

Establish trust that you’re looking out for their best interest. Remind them that the insurance premiums they pay is for covering the cost of your services in this exact scenario, not for them to pocket insurance money.

Explain that the adjuster will do an estimate, you will do an estimate, there will be differences, some things might not get approved, there will be some back and forth for decisions to be made, but ultimately they will be taken care of and restoring their home doesn’t have to wait.

You need the homeowner to trust that you’re looking out for their best interests as well as your own. It is in their best interest to do business with a contractor that will still be in business next year, and it is in your best interest to get paid the O&P you need to stay in business.

Did we mention Xactimate yet? We can’t say it enough. It is so important to be thorough with the estimate.

Being thorough with the estimate doesn’t mean trying to include every possible line item in the system and hoping they approve enough of them to actually cover your cost. That wouldn’t be accurate.

Be thorough in your assessment of the job and accurate in selecting your line items and designating the costs for the project. Always have a firmly justifiable reason for everything on your estimate.

Log Everything

The timing of how everything works out can be all over the place. Some projects you might know at the beginning that you’ll need to make a case for O&P. For other projects, it might not be apparent until the middle or closer to the end.

One way to make sure your case is always being built, is to simply keep a logbook for every project. It could simply be a document on the computer where you’re taking notes of everything happening on the project.

Photos Prove Everything

We’re big on all things photo related. If it isn’t photographed it didn’t happen. Take pictures of everything that’s happening every day. That is a sure way to capture literal evidence that multiple trades were on the job to build your case for O&P.

How MAX4 Helps You Get O&P

You’re a roofing pro. We know what that's like because we’ve done roofing and construction too. We also have extensive experience in roofing insurance claims and supplements. Now we are insurance pros. We help roofing pros.

Here are just a few of the things we can do to help you get O&P:

  • We can help you build your case to the adjusters and overcome their disputes for your O&P supplement claims. Our team is full of Senior File Examiners and we have trained tons of desk adjusters. The very same adjusters reviewing your supplements.

  • We can help you use Xactimate correctly to build your estimates because we know exactly what the adjuster is looking for.

  • We know the county codes inside and out. Yes, even your county. We have tools we use to stay on top of every code in every jurisdiction. That helps us make sure your estimate is thorough and accurate.

  • We are specialists at removing the burden of the supplementing process. Imagine, not dealing with the insurance carriers. We will do that for you!

We want to see you get all the O&P you deserve, and we’re here to help when you’re ready. Hopefully this article is useful information for you.

If you have any questions or if we can help you in any way, please reach out to

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As a former construction person 50 years experience is it possible for me to do work on my house be the general contractor and claim overhead and profit on an insurance hail damage claim for my own house?

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