O&P: Why You're Entitled to Overhead & Profit on Every Roofing Insurance Claim

If you've ever submitted an insurance claim and wondered why the estimate seems low, Overhead and Profit — universally known in the industry as O&P — is often the reason. It's one of the most frequently missed, most frequently disputed, and most consistently recoverable line items in roofing insurance claims.

Here's what O&P is, why you're entitled to it, why insurance companies resist paying it, and how to make sure you get it on every single claim.

What Is Overhead & Profit?

Overhead and Profit is a standard component of contractor pricing that accounts for the real cost of running a business beyond direct labor and materials. In Xactimate estimates — the software used by virtually every insurance carrier — O&P is typically expressed as:

• 10% Overhead — General operating costs: insurance, licenses, office, equipment, vehicles, administrative staff, marketing, software, compliance
• 10% Profit — The legitimate return on the contractor's investment, risk, and expertise

Together, O&P adds 20% to the cost of materials and labor on a claim. On a $20,000 roofing claim, that's $4,000. That's not a bonus — it's the difference between a job that's profitable and one that costs you money to complete.

Why Insurance Companies Resist Paying O&P

Insurance carriers have a financial incentive to exclude O&P from their initial estimates. $4,000 per claim across thousands of claims adds up to hundreds of millions of dollars across a carrier's book of business.

Their most common argument: "The policyholder can do the work themselves" or "This is a specialty trade that doesn't require a general contractor." Both arguments are weak — and both have been challenged successfully in supplement disputes and even litigation across the country.

When Are You Entitled to O&P?

The legal and industry standard position is that O&P is owed when:

• A general contractor is coordinating the work (even if you're also the roofer)
• Multiple trades are required to complete the restoration
• The work requires coordination, scheduling, and management beyond simple labor
• The contractor is carrying liability and workers' comp insurance for the project

In practice, this means O&P is owed on virtually every insurance restoration roofing job. If you are a licensed roofing contractor managing a complete re-roof — including coordination with any other trades, permit pulling, inspection scheduling, and warranty compliance — you are functioning as a general contractor and O&P applies.

Common Insurance Company Tactics to Deny O&P

Here's how carriers typically try to avoid paying O&P — and how to respond:

"You're a specialty contractor, not a GC."

Response: You are a licensed contractor managing a complete restoration project, including coordination, permitting, and warranty compliance. The nature of insurance restoration work is general contracting, regardless of your primary trade classification.

"The policy doesn't require O&P."

Response: The policy requires payment of the cost to repair or replace with like kind and quality. O&P is a real and standard component of contractor cost — not an add-on. Excluding it underpays the claim.

"We'll add O&P when you provide a contractor's invoice."

Response: Document the O&P in your supplement request with your contractor's estimate and license information. Don't wait until after the job — submit it with the supplement, supported by your written estimate.

"We reduced O&P to 15% combined."

Response: The Xactimate industry standard is 10% + 10% = 20% combined. A unilateral reduction below this standard requires a specific policy provision justifying the reduction, which most policies don't have.

How to Supplement for O&P Successfully

The key to getting O&P approved is documentation. Here's what to include in your supplement request:

1. Contractor's written estimate — showing your standard O&P markup
2. Contractor's license number — establishing your status as a licensed contractor
3. Proof of insurance — demonstrating that you carry the overhead costs O&P is designed to cover
4. Letter of intent or signed contract — showing the homeowner has engaged you as the contractor
5. Xactimate line item notation — clearly showing O&P applied at 10%/10% in your supplemental estimate

What Happens If They Still Deny It?

If the carrier denies a well-documented O&P supplement, the next steps are:

• Escalate to a supervisor — Many front-line adjusters deny O&P out of habit. A supervisor may approve it immediately.
• Request a written denial with policy citation — Ask the carrier to put their denial in writing and cite the specific policy provision. Many can't.
• File a complaint — In Texas, the Texas Department of Insurance (TDI) takes improper claim handling seriously. A formal complaint often produces fast results.
• Engage a public adjuster — On large commercial claims, a public adjuster may be warranted if the carrier is systematically denying legitimate O&P.

The Bottom Line on O&P

Overhead and Profit is not a favor the insurance company does for you. It's a standard component of what it costs to complete a professional roofing job. When it's excluded from an initial estimate, it's an underpayment — and it's supplementable.

Every roofing contractor working insurance restoration jobs should be supplementing for O&P on every claim. If you're not, you're subsidizing your customers' insurance company with your own margin.