O&P (Overhead and Profit)
Overhead and Profit (O&P) is a 20% markup (10% overhead + 10% profit) added to an insurance estimate when a general contractor manages multiple trades on a single claim. O&P is built into Xactimate as an industry-standard calculation and is supported by most state insurance departments.
The $4,000 Line Item Carriers Love to Deny
Overhead and Profit (O&P) is a 20% markup - consisting of 10% overhead and 10% profit - added to an insurance estimate when a general contractor manages multiple trades, and carriers fight it on nearly every claim. On a $20,000 roof replacement, O&P equals $4,000. On a $40,000 storm damage claim with multiple trades, it equals $8,000. Xactimate has O&P built in as a standard calculation, yet carriers routinely strip it from estimates, claiming the contractor is "self-performing" and does not qualify. Understanding when O&P applies and how to defend it is one of the highest-value skills in insurance restoration.
When O&P Applies
The three-trade rule is the industry standard. When a general contractor manages three or more distinct trades on a single claim, O&P should be included. Xactimate's own documentation supports this, and most state insurance departments recognize it.
| Trades on the Job | O&P Eligibility | Example |
|---|---|---|
| 1 trade (roofing only) | Typically denied | Shingle replacement only |
| 2 trades (roofing + gutters) | Arguable, carrier-dependent | Roof + gutter replacement |
| 3+ trades (roofing + gutters + painting) | Industry standard = O&P included | Full exterior restoration |
Make sure each trade is assigned to its own trade group in Xactimate. Bundling multiple trades under one group gives the carrier ammunition to deny O&P.
How Carriers Deny It
Know the playbook so you can counter it. Carriers deny O&P using three main arguments: the contractor is self-performing (not subcontracting), the trades are "related" (roofing and gutters are "the same thing"), or the job does not meet the three-trade threshold. The defense is documentation. Keep subcontractor invoices, assign trades to separate trade groups, and cite the state insurance department's position on O&P in your supplement.
Some carriers have internal guidelines that automatically strip O&P unless the adjuster manually adds it. That means O&P is missing by default on their initial scope of loss, and recovering it falls entirely on your supplement.
O&P Math on a Real Claim
O&P is calculated on the net claim, not including the deductible. On a $25,000 RCV estimate:
- 10% overhead: $2,500
- 10% profit: $2,500
- Total O&P: $5,000
That $5,000 is the difference between a profitable job and a break-even job. For public adjusters working on contingency, recovering O&P directly increases their fee. For contractors, it is margin you earned by managing the project. Do not leave it on the table.
Further reading
Frequently asked questions
O&P on a $20,000 roof replacement is $4,000 (10% overhead + 10% profit = 20%). Carriers deny it constantly, usually claiming the contractor is self-performing and not managing subcontractors.
O&P should be included when a general contractor manages multiple trades on a single job. The three-trade rule is the standard: if the job requires roofing, gutters, and painting (three trades), O&P should be included.
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