The Complete Guide to Overhead and Profit (O&P) on Roofing Insurance Claims

Overhead and profit (O&P) is a standard line item on insurance claims that compensates contractors for the cost of managing a project (overhead) and the margin earned for performing the work (profit). O&P is calculated using the 10 and 10 formula: 10% for overhead plus 10% for profit, applied to the total claim amount.

O&P is one of the most frequently denied, underpaid, and misunderstood components of roofing insurance claims. It is also one of the most valuable. On a $30,000 claim, O&P adds approximately $6,000. On a $50,000 claim, it adds $10,000. Yet many contractors never recover this money because they accept carrier denials without pushing back.

This guide explains what O&P is, when you qualify for it, why carriers deny it, and exactly how to document your claims so you recover O&P consistently.

What Is the 10 and 10 Formula?

The 10 and 10 formula is the insurance industry standard for calculating overhead and profit on property damage claims. It applies a 10% overhead charge and a 10% profit charge to the total estimate amount.

Here is how the math works:

• Base estimate total: $25,000
• Overhead (10%): $2,500
• Subtotal with overhead: $27,500
• Profit (10% of subtotal): $2,500
• Total with O&P: $30,000

Xactimate, the insurance industry's standard estimating software, has a built-in function for applying O&P. When a claim qualifies, O&P should be added as a line item in the estimate. It is not something you need to calculate manually or negotiate as a separate fee.

When Does a Roofing Claim Qualify for O&P?

Every insurance company is different but there are several standards.

1. A roofing claim qualifies for O&P when the project requires coordination of three or more distinct trades.
2. O&P should be considered when there is timing and coordination of overlapping trades.

These are the standards applied by most insurance carriers, and it comes from established claims handling guidelines.

The logic is straightforward. When a general contractor must hire, schedule, and coordinate multiple subcontractors, the contractor incurs overhead costs (insurance, supervision, scheduling, project management) and deserves a profit margin for managing the project. O&P compensates for that coordination.

Many roofing jobs involve more trades than carriers initially acknowledge. Here are common trades found on residential roofing claims:

1. Roofing. Tear-off and installation of shingles, underlayment, and related materials.
2. Carpentry. Replacement of damaged roof decking, fascia boards, or rafters.
3. Sheet metal/flashing. Custom fabrication and installation of flashing, drip edge, or metal trim.
4. Gutters. Detach, reset, or replace gutters and downspouts during roof replacement.
5. Painting. Touch-up or repaint of fascia, soffits, or exterior trim disturbed during the roof replacement.
6. Drywall. Interior ceiling or wall repair if leaks caused water damage.
7. Electrical. Resetting or replacing attic fans, solar panels, or other rooftop electrical components.
8. HVAC. Detach and reset of rooftop HVAC units, vents, or ductwork.
9. Skylight installation. Replacement or resetting of skylights.
10. Masonry. Tuck point the brick or stone after installing new chimney flashing

If your job includes any three of these trades, you should be requesting O&P. The key is documenting every trade involved in the project so the carrier cannot argue that the work is "single trade."

Why Do Insurance Carriers Deny O&P?

Insurance carriers deny O&P because it represents a significant additional cost on every claim. Reducing or eliminating O&P across thousands of claims saves carriers millions of dollars annually.

Here are the most common reasons carriers give for denying O&P, along with the reality behind each denial:

"The job only involves one trade."

This is the most frequent denial. Carriers argue that a roof replacement is a single-trade job and does not warrant O&P. In reality, most roof replacements may involve multiple trades when you account for decking replacement (carpentry), gutter detach and reset, and flashing work (sheet metal), and skylights.

The solution is thorough documentation. List every trade on the estimate and provide photos showing why each trade is necessary.

"You are not acting as a general contractor."

Some carriers argue that the roofing company is performing all the work itself and therefore is not incurring general contractor overhead. This argument misunderstands the purpose of O&P. Even when a single company performs multiple trades, the company still incurs overhead costs for coordination, supervision, insurance, and project management.

"O&P is only for large or complex jobs."

There is no dollar threshold or complexity requirement for O&P. The standard is three or more trades, regardless of the total claim amount. A $12,000 claim with three trades qualifies just as much as a $50,000 claim.

"Our policy does not cover O&P."

O&P is not a policy-level coverage issue. It is a standard component of how claims are estimated and paid. Carriers that claim O&P is not covered are misrepresenting how Xactimate pricing works. O&P is a recognized line item in the Xactimate estimating system, and it applies when the three-trade threshold is met.

How Much Is O&P Worth on Typical Claims?

O&P adds approximately 20% to the base estimate total. Here is a comparison of claim values with and without O&P across common scenarios:

| Scenario | Base Estimate | O&P Amount | Total with O&P | % Increase | |----------|--------------|------------|----------------|------------| | Small residential roof (15 squares) | $10,000 | $2,000 | $12,000 | 20% | | Medium residential roof (25 squares) | $18,000 | $3,600 | $21,600 | 20% | | Large residential roof (40 squares) | $30,000 | $6,000 | $36,000 | 20% | | Residential with interior damage | $35,000 | $7,000 | $42,000 | 20% | | Small commercial roof | $50,000 | $10,000 | $60,000 | 20% | | Large commercial roof | $120,000 | $24,000 | $144,000 | 20% |

For a contractor completing 75 jobs per year with an average base estimate of $20,000, recovering O&P on every job adds approximately $300,000 in annual revenue. If O&P is only warranted on half the jobs, that adds another $150,000. That's revenue you are already entitled to for work you're already performing.

How to Document Your Claim for O&P Approval

Documentation is the difference between O&P approval and denial. Carriers deny O&P when they can argue the job is single-trade. Your documentation must make that argument impossible.

Step 1: Identify Every Trade on the Job

Before you submit your supplement, walk through the entire scope of work and list every distinct trade. Do not limit yourself to what the carrier included in the original estimate. If the job requires it, document it.

Common trades that contractors overlook:

• Painting of fascia or soffits disturbed during tear-off
• Gutter detach and reset (this is a separate trade from roofing)
• Custom sheet metal work
• Carpentry for decking replacement, fascia repair, or rafter repair
• Electrical work for resetting satellite dishes, solar panels, or attic fans

Step 2: Photograph Evidence of Each Trade

Take clear, labeled photos showing why each trade is necessary. For example:

• Carpentry: Photograph damaged or rotted decking that requires replacement. Include a measurement showing the extent of the damage.
• Sheet metal: Photograph existing flashing that needs replacement or areas where custom flashing fabrication is required.
• Painting: Photograph areas where fascia or trim paint will be disturbed during the roof replacement.
• Gutters: Photograph gutters that must be detached and reset to properly install drip edge and starter strip.

Step 3: List Trades Explicitly in Your Supplement

When writing your supplement in Xactimate, include a note or summary page that explicitly lists each trade involved in the project. Do not assume the carrier will identify the trades from the line items alone. Make it obvious.

Example trade summary:

This project requires the coordination of the following trades: (1) Roofing, tear-off and installation, (2) Carpentry, replacement of 6 sheets of roof decking, (3) Sheet metal, fabrication and installation of step flashing and counter flashing, (4) Gutter, detach and reset of 120 LF of gutters and 4 downspouts, (5) Painting, touch-up of fascia boards and rake trim.

Step 4: Reference Industry Standards

Support your O&P claim by referencing industry standards and carrier guidelines. Several authoritative sources confirm the three-trade standard:

• Xactimate's own documentation recognizes O&P as a standard line item when multiple trades are coordinated.
• State insurance regulations in many states require carriers to pay O&P when the general contractor coordinates multiple trades.
• The NAPIA (National Association of Public Insurance Adjusters) has published position papers supporting O&P on multi-trade claims.

Including these references in your supplement strengthens your position and makes it harder for carriers to issue a blanket denial.

Step 5: Follow Up Persistently

O&P denials are not always final. Many carriers issue an initial denial as a standard practice, then approve O&P when the contractor or supplement company pushes back with proper documentation.

At IA Solutions, we follow up on every O&P denial with a detailed response that includes trade documentation, code references, and a clear explanation of why O&P applies. Our follow-up schedule starts 7 days after submission and continues every other business day until resolution.

State Regulations on O&P

Several states have specific regulations or insurance department bulletins that address O&P on property damage claims. Understanding your state's position can strengthen your supplement.

Notable examples:

• Colorado: The Colorado Division of Insurance has issued guidance confirming that carriers must pay O&P when the claim involves coordination of multiple trades.
• Texas: The Texas Department of Insurance has addressed O&P in carrier complaint investigations, supporting contractor claims when proper documentation was provided.
• Florida: Florida's insurance regulations require carriers to pay the reasonable cost of repairs, which includes general contractor overhead and profit when applicable.

If your state has issued guidance on O&P, include a reference to it in your supplement documentation. This adds regulatory weight to your claim.

Common Mistakes Contractors Make with O&P

Avoiding these mistakes will significantly improve your O&P recovery rate:

Mistake 1: Not asking for O&P at all. Many contractors do not realize they qualify or assume the carrier will include it automatically. Carriers almost never add O&P unless you specifically request it.

Mistake 2: Failing to list all trades. If you only mention roofing and carpentry, the carrier will argue you have two trades, not three. Document every trade, even minor ones like painting touch-up or gutter reset.

Mistake 3: Accepting the first denial. Carriers deny O&P as a standard practice. The first denial is not the final answer. Respond with documentation and push back professionally.

Mistake 4: Poor documentation. A verbal argument for O&P is not enough. You need photos, measurements, and a written trade summary in your supplement. If you cannot prove a trade is involved, the carrier will not pay for it.

Mistake 5: Using the wrong Xactimate codes. O&P must be applied correctly in Xactimate. Using incorrect category codes or selectors can result in O&P being calculated on the wrong line items or excluded entirely.

How IA Solutions Helps You Recover O&P

IA Solutions has recovered O&P on thousands of claims across the country. Our licensed Independent Adjusters know exactly how to document, present, and negotiate O&P with every major carrier.

Here is what we do differently:

• Trade identification. We review every claim for all applicable trades, including ones contractors commonly overlook.
• Documentation support. We guide you on exactly what photos and measurements to capture for O&P justification.
• Xactimate accuracy. Every supplement we write with multiple trades includes O&P with the correct codes and formatting.
• Carrier follow-up. We do not submit and forget. We follow up every other business day until O&P is approved or a clear reason for denial is provided.
• Denial response. When a carrier denies O&P, we respond with a detailed rebuttal including trade documentation, code references, and regulatory citations.

Our supplements help contractors recover an average of 20-40% more per claim, and O&P is frequently the largest single factor in that recovery.

Start Recovering O&P on Every Qualifying Claim

If you are leaving O&P on the table, you are losing thousands of dollars per job. The three-trade threshold is met on the majority of residential claims, yet most contractors never recover this money.

IA Solutions can review your current claims and identify O&P opportunities you may be missing. Our complimentary supplement review (a $150 value) will show you exactly how much additional revenue is available on your open claims.

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Call (850) 498-4891 to speak with a licensed Independent Adjuster today.