O&P isn’t a bonus. Learning how to get insurance carriers to pay overhead and profit to keep your business alive.
If you’re in the roofing, restoration, mitigation, or remediation game, you’ve probably run into this question: Do insurance companies have to pay overhead and profit (O&P)? The obvious first answer to that is, no – they don’t have to pay it, but as a public adjuster, I’m here to help you get paid what you deserve. Insurance claims can be tricky, and O&P is a big part of making sure your business stays in the black. So, let’s dive in and clear up the confusion!
What are Overhead and Profit?
First, let’s get on the same page about what O&P means. It’s not as complicated as it sounds.
Overhead is the extra stuff you pay for to keep your business running. These aren’t costs tied directly to hammering nails or fixing roofs. Think office rent, utility bills, or salaries for your office team. You’ve got to cover these, whether you’re on a job site or not.
Profit, on the other hand, is what’s left after you pay all your bills. It’s the money you take home or use to grow your company. Without profit, why even bother, right?
Insurance companies sometimes act like O&P is optional. But here’s the thing—it’s not. You need both to survive long-term.
Why Overhead and Profit Matter to You
Say you take on a roofing job and the insurance company pays you just enough to cover materials and labor. Sounds okay, right? Not really. If you don’t factor in overhead—like your truck payments or phone bill—you’re dipping into your own pocket. And if there’s no profit? You’re working for free. That’s a fast track to going broke.
O&P isn’t a bonus. It’s how you keep your business alive. Insurance carriers might push back, but you’ve got every right to include it in your estimates.
The Big Misconception: Complexity and Multiple Trades
Here’s where things get messy. A lot of insurance companies say, “We only pay O&P if the job is complex or involves multiple trades.” Ever heard that one? I bet you have. They’ll argue that a simple roof repair doesn’t need it. But guess what? That’s not how it works.
I’ve dug into the Xactimate white paper—you know, the industry standard for insurance estimating software—and it doesn’t say a word about “complexity” or “multiple trades” being a requirement for O&P. Not one word! This idea seems to be something insurance companies made up to save a buck. Don’t let them fool you.
“General overhead expenses aren’t included in Verisk’s unit pricing but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin.”
See? O&P is standard, not some special add-on.
How to Include Overhead & Profit in Your Xactimate Estimates
So, how do you make sure they pay overhead and profit? Let’s break it down into bite-sized pieces. If you use Xactimate (and most of you probably do), here’s where it fits.
General O&P
This is the big-picture stuff—your office costs and the profit you need to keep going. In Xactimate, you add these as a percentage of the total estimate. Open the Estimate Parameters window, plug in your numbers, and boom—you’ve got what’s called “general contractor’s O&P.” Simple as that.
Job-Related Overhead
What about costs tied to a specific job? Think project managers, portable toilets, or temporary fencing. These aren’t in the standard unit prices either. You add them as separate line items in the Line Item Entry window. Pick the right price list items or create your own. This keeps everything clear and fair.
Job-Personnel Overhead
This covers costs for your crew—like tools, uniforms, or truck expenses. If you’re using subcontractors, it’s their O&P instead. In Xactimate, this is baked into the labor overhead part of each unit price. Need to tweak it so your cost matches your estimate? Go to the component list, select View Retail Labor Rate Components, and adjust away. It’s all right there for you.
“Job personnel overhead (or subcontractor O&P) expenses are included in the labor overhead portion of each unit price in the Verisk price list.”
Why Insurance Companies Push Back on O&P
Let’s be real. Insurance companies aren’t your biggest fans when it comes to paying out. They’re businesses too, and they want to keep costs low. Saying they only have to pay overhead and profit for “complex” jobs is one way they try to wiggle out of it. But just like the insurance carrier, you’re not in business to lose money, are you?
If they resist, don’t back down. Point to how Xactimate works. Show them the white paper. You’re not asking for a handout; you’re asking to be paid fairly. If all else fails, submit your claim to us and we’ll help you fight for it or give you advice on how to approach it. We know the ins and outs of the industry and can help you get what you deserve
Tips to Get Carriers to Pay Overhead and Profit
Ready to fight to get the carrier to pay overhead and profit? Here are five easy tips to make it happen:
- Know Your Stuff: Learn what overhead and profit are and how they fit into estimates. Knowledge is power!
- Lean on Standards: Use the Xactimate white paper or other industry resources to back up your claims. It’s hard to argue with the facts.
- Get Detailed: Write estimates that cover everything—materials, labor, overhead, profit. Leave no room for debate.
- Talk It Out: Explain to the adjuster why O&P matters to your business and why they are supposed to pay it. Keep it simple and firm.
- Hold the Line: Don’t let them bully you into cutting corners. You deserve fair pay for your work.
If all else fails, get help from SupplementPro to back you up and negotiate with the insurance company to pay overhead and profit for you.
The Bottom Line
Overhead and profit aren’t optional—they’re essential. Insurance companies might try to dodge their responsibility to pay overhead and profit by throwing around terms like “complexity” or “multiple trades,” but that’s not how the industry works. The white paper from Verisk proves it. You’ve got the tools and the know-how to include O&P in every estimate.
Don’t let anyone shortchange you. You’re not just fixing roofs or cleaning up messes—you’re running a business. Make sure you’re paid like it.
