Your insurance company just kept 20% of your claim and you didn’t even know it! How this happens is simple – there is a place in the estimating software that automatically adds for a general contractor’s overhead (10%) and profit (10%). Whether the insurer chooses to repair or replace the structure, a deduction for overhead and profit is not reasonable or proper and is unfair to the insured.
Many insurers tell their adjusters to withhold general contractor overhead and profit until it is actually incurred. This is wrong – overhead and profit is necessary and should always be included in the calculation. If this is not added into your estimate, the insurance company is assuming that you yourself will hire the specific sub-contractors for each component of your claim.
The benchmark used by most insurance companies is that overhead and profit is only owed if more than three trades are involved in the repair. Where and when this “three trade” rule came into play may never be known, but it does not have any binding authority. The truth is almost every property loss has multiple trades involved, even a simple roof claim.
The real problem is that, without the additional 20% factored into your estimate, you are forced to compromise the quality of work done to your home and end up performing the general contractor’s duties yourself. The insurance companies tell the homeowner and the contractor that this is only accounted for if the loss warrants it and that it is entirely at the adjuster’s discretion.
The bottom line is you can’t be an expert at all things and insurance claims are complicated financial transactions. It is always best to consult with an expert on your side. Claimside is here to connect you with the claim professionals in your area which will result in a great experience and a fair resolution of your claim.