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Contractors in the insurance reconstruction and re-roofing industry often face challenges in getting Overhead and Profit (O&P) approved in their estimates, especially when using Xactimate software. Understanding the intricacies of O&P and employing best practices can significantly enhance the chances of approval by insurance carriers.

What is Overhead and Profit (O&P)?

General Overhead:

  • Defined as indirect costs not directly attributed to a specific project.
  • Includes expenses like office rent, utilities, office supplies, and advertising.
  • In Xactimate, added as a percentage of the total bid in the Estimate Parameters window.

Job-Related Overhead:

  • Expenses tied to a project but not to a specific task.
  • Examples include project managers, roof reports, Matterport scans and temporary power.
  • Added in Xactimate as separate line items in the Line Item Entry window.


  • The excess of the selling price over the cost, facilitating company growth.
  • Typically added alongside general overhead.

Job-Personnel Overhead/Sub-Contractor O&P:

  • Covers non-wage expenses incurred by employees or subcontractors.
  • Included in Xactimate’s Labor Overhead within unit prices.

Why O&P Approval is Challenging?

Insurance carriers often scrutinize O&P claims, considering them as additional expenses beyond direct project costs. They may require detailed justifications for these charges, making approval a complex process.

Best Practices for Securing O&P Approval:

  1. Detailed Justification: Clearly articulate the need for O&P in your estimates. Explain how each element of overhead and profit is essential for the project’s success.
  2. Leverage Xactimate Features: Use the Estimate Parameters and Line Item Entry windows effectively to itemize O&P costs. Ensure you update the Labor Overhead portion correctly.
  3. Market Research and Documentation: Stay informed about current market rates and document all your expenses meticulously. This data supports your O&P claims.
  4. Clear Communication with Insurance Carriers: Maintain open lines of communication. Provide comprehensive breakdowns and respond promptly to inquiries.
  5. Understand Carrier Policies: Different carriers have varied policies regarding O&P. Familiarize yourself with these policies to tailor your estimates accordingly.
  6. Professionalism and Persistence: Present your case professionally and be persistent. Rejections are not final and can often be negotiated with additional information.

Understanding and effectively navigating the complexities of Overhead and Profit in insurance-related construction and re-roofing jobs is crucial for contractors. Utilizing Xactimate’s capabilities and adhering to best practices can enhance the likelihood of O&P approval, ensuring fair compensation for your efforts and expenses.

Are you a contractor struggling with O&P approvals? Contact us for specialized guidance and support tailored to your unique challenges in the insurance reconstruction and re-roofing industry.

Team EOD

Author Team EOD

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