Overhead & Profit: The 20% Most People Leave on the Table
Your kitchen was gutted after a pipe burst. Seven different crews need to show up in the right order: demo, plumbing, electrical, drywall, flooring, painting, cabinets. Someone has to schedule them, manage the materials, handle the inspections, and make sure the plumber finishes before the drywall crew shows up. That coordination costs money. But when you look at your insurance estimate, there's no line item for it.
Read more → coordination on multi-trade repairs. If your project involves three or more types of work, O&P should be in your estimate. On a $50,000 kitchen repair, that's $10,000 sitting on the table. You just have to know to ask for it.
What O&P actually pays for
When your repair needs multiple types of contractors (called trades), someone has to manage the whole project. A plumber, electrician, drywall installer, and painter don't coordinate themselves. A general contractor handles scheduling, material staging, building inspections, warranty management, and the day-to-day supervision that keeps everything moving.
Overhead covers their business costs: insurance premiums ($5,000-$15,000/year for a licensed GC), vehicles, office, project management, and on-site supervision. Profit is their compensation for taking on the financial risk, including warranty obligations. Here's the thing.
Without O&P, no reputable general contractor will take on your multi-trade insurance repair. They literally can't cover their costs. The industry standard recognized by XactimateXactimate: The Software Behind Every Insurance EstimateXactimate is the industry-standard software used by insurers, contractors, and public adjusters to price repair work. It contains thousands of line...
Read more → is 10% overhead plus 10% profit, applied to the total subcontracted work.
- 10% overhead + 10% profit = ~20% added to base repair cost
- $40,000 kitchen restoration = $8,000-$8,400 in O&P
- $100,000 multi-room claim = $20,000 in O&P
The three-trade threshold
Insurance companies typically require three or more distinct trades before they'll include O&P. But here's what most people miss: courts have generally held that O&P is owed whenever hiring a general contractor is reasonably necessary, regardless of trade count. The three-trade rule is just the standard most adjusters follow.
Count the trades on a kitchen water damage repair: demo, plumbing, electrical, drywall, flooring, painting, cabinetry. That's seven. Even a "simple" bathroom repair often hits plumbing, tile, drywall, and painting.
Four trades. Now, watch for adjusters who try to combine trades to squeeze below three. Demo and drywall installation are performed by different crews with different skills.
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Read more → require different equipment. If someone tries to tell you that demo and drywall are "the same trade," push back. They're not.
| Project type | Typical trades involved | O&P warranted? |
|---|---|---|
| Kitchen water damage | Demo, plumbing, electrical, drywall, flooring, painting, cabinets (7) | Yes |
| Bathroom water damage | Plumbing, tile, drywall, painting (4) | Yes |
| Single-room painting | Painting (1) | No |
| Roof + interior ceiling | Roofing, drywall, painting, insulation (4) | Yes |
Why adjusters leave it off
Some carriers have internal guidelines that instruct adjusters to leave O&P off the first estimate. They'll add it if you ask. But only if you ask.
Nobody told me that. This isn't illegal, but it means legitimate O&P goes unclaimed every year because people don't know to look for it. The most common arguments you'll hear: "The homeowner can hire subcontractors directly.
" Sure, in theory. In practice, try coordinating seven licensed, insured contractors yourself while living in a hotel. Good luck.
Or: "This isn't complex enough to warrant a GC. " If you're looking at three or more trades, that argument doesn't hold up. The American Association of Public Insurance Adjusters supports O&P as standard for multi-trade projects requiring general contractor coordination.
If your adjuster pushes back, ask them to put their reasoning in writing. That question alone often resolves it.
Real numbers on real projects
O&P adds roughly 20% to the base repair cost. Let me show you what that looks like on real projects. On a $30,000 repair, O&P adds $6,000.
On a $75,000 kitchen restoration, it's $15,000. A major water damage claim across multiple rooms totaling $100,000 in base repairs? The O&P component is $20,000.
That's a lot of money to leave on the table. These numbers represent real costs a general contractor absorbs: their insurance premiums, project management time, supervision hours, warranty exposure, and the financial risk of fronting materials and labor before the insurance check arrives. No reputable GC will take on a complex insurance repair without O&P.
The economics just don't work. This is why understanding the difference between a general contractor and a handyman matters for insurance work.
- Look for a line item near the bottom labeled 'Overhead' and 'Profit'
- Each should be listed as 10% of the total repair cost
- If the line items are missing entirely, the 20% hasn't been included
How to get it added to your estimate
Pull out your estimate and look for an O&P line item. It's usually at the bottom as a percentage-based calculation. If it's not there, count the trades yourself.
List every type of work separately: demo, plumbing, electrical, drywall, flooring, painting, cabinetry, tile, HVAC. Three or more means O&P applies. When you call your adjuster, be specific: "I count five different trades on this project.
Can you explain why overhead and profit wasn't included? " Reference Xactimate's built-in O&P function if they push back. If they say it doesn't apply, ask for that in writing with their reasoning.
Most of the time, simply asking the question is enough. The adjuster knows the standard. They're waiting to see if you know it too.
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Read more → can confirm whether O&P is warranted and help you make the case.
Quick-check your estimate
- Does your estimate have an O&P line item? (Usually at the bottom, as a percentage)
- Count the distinct trades involved: demo, plumbing, electrical, drywall, flooring, painting, cabinets, tile, HVAC
- Are there three or more? If yes, O&P should be included
- If O&P is missing, have you asked your adjuster to explain why in writing?
See how this applies to your property
Upload photos of your damage and get a detailed analysis showing exactly where your estimate may fall short.