Mastering Home Insurance Claim Negotiations: Overcoming Contractor Expense Challenges

home insurance contractor expense

When disaster strikes, your home may be damaged, and you have to file a claim with your insurance company. You may feel peace of mind, confident your policy will cover the repairs… But then the adjuster’s estimate arrives, and your heart sinks. It’s significantly lower than the contractor’s quote, leaving you staring at a financial gap. What do you do now?

Here’s the harsh reality: insurance companies often undervalue estimates to boost their profits. A common area of dispute is the overhead and profit portion of your contractor’s bill. Insurers will question whether overhead and profit are owed on your claim and whether the initial payment should include these expenses. Don’t get stuck with the short end of the stick! There are ways to negotiate when your insurance company won’t pay.

What Are Contractor Overhead and Profit Expenses?

overhead and profit expenses

Contractor expenses, also known as Overhead and Profit (O&P), are intended to cover the general contractor’s operational costs and generate profit. Overhead and profit are separate cost components, although they are commonly combined. 

The general contractor assigns a percentage to each cost, usually “10 and 10.” This means that 10% of the total job estimate is allocated to overhead costs, including equipment, office rent, utilities, employee salaries and benefits, licenses, and advertising. The remaining 10% represents the contractor’s profit. If you decide to act as your own general contractor, insurance companies may not reimburse you for overhead and profit on all claim-related expenses.

Insurance companies have traditionally argued that Overhead and Profit should only be paid if three or more trades are involved in the repair or replacement of the damaged property. They justify this stance by assuming that if multiple trades are involved, a general contractor is needed to oversee and coordinate the entire process. The specific laws of your state will determine what expenses are reasonable to recover, but it is reasonable to request payment for O&P as part of the overall payment for repairing or replacing the damaged property.

Why Are Contractor Expenses Negotiable?

Overhead and Profit (O&P)

Contractors have legitimate overhead costs (office rent, salaries, etc.) and expect a reasonable profit. Insurance companies might try to exclude these costs, arguing they’re “built into” the labor rate. This isn’t always true, and a skilled negotiator can fight for their inclusion.

You, as the policyholder, are entitled to recover O&P expenses in most cases even if your insurance company refuses to pay them.

Materials & Labor 

Different contractors have different pricing structures. Insurance companies may base their estimates on generic rates that don’t reflect the specific materials and labor needed for your repair. A public adjuster can compare market rates and advocate for the actual cost of quality repairs.

Scope of Damage 

Insurance adjusters might miss hidden damage or underestimate the repair complexity. A meticulous assessment done by a public adjuster ensures all damage is documented and properly cost.

Additional Tips

  • Review your policy: Understand your coverage and exclusions before starting negotiations.
  • Gather documentation: Provide receipts, estimates, and contractor qualifications to support your claim.
  • Stay calm and professional: Remember, negotiation is a process. Be assertive but respectful in your communication.
  • Walk away if necessary: If the insurance company refuses to budge, consider seeking legal advice or mediation (i.e. public adjuster). 

How Fortitude Public Adjusters Helps

Fortitude Public Adjusters offers expertise in dealing with insurance companies and understanding their negotiation tactics. With extensive experience, we know how to build a strong case for your claim and speak the language of insurance professionals. 

As your advocate, we handle all communication with the insurance company, relieving you of stress and hassle. We present your case professionally and persistently, maximizing your chances of a favorable outcome. Don’t settle for less than you deserve! When it comes to negotiating contractor expenses on your home insurance claim, partner with Fortitude Public Adjusters. 

Contact us today for a free consultation and discover how we can help you secure the fair settlement you deserve.

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