What Is General Contractor’s Overhead and Profit?

When dealing with roofing insurance claims, understanding the general contractor’s overhead and profit (often abbreviated as O&P) is particularly crucial, as it can significantly impact the total reimbursement from an insurance company following damage to your roof. Many of the restoration projects that we do at Indy Exterior Services involve O&P due to the complexity of the job.

Overhead and Profit in Roofing Insurance Claims

Overhead and profit are standard elements in the construction industry’s cost structure, including roofing repairs or replacements driven by insurance claims. For a general contractor, overhead expenses encompass operational costs that are not directly tied to a specific job—like office expenses, staff salaries, insurance, and vehicle costs—as previously mentioned. Profit is the margin that a contractor aims to earn beyond the total cost of the project, which compensates them for their expertise and the risks involved in the business.

How Insurers View O&P

Insurance companies typically acknowledge overhead and profit as part of the claim settlement when a general contractor is necessary to coordinate and supervise various aspects of the roofing project. This is usually when the repair work involves multiple trades other than roofing, such as electrical work, carpentry, or interior decorating, which necessitates significant management and coordination.

However, insurance policies and practices can vary. Some insurers might only agree to pay for O&P if there are at least three trades involved in the repair work, following the “three-trade rule” which some companies apply as a criterion for O&P eligibility. This rule can often be a point of contention between homeowners and insurance adjusters.

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Importance of O&P in Roofing Claims

  1. Fair Compensation: Including O&P in the insurance claim ensures that the contractor is fairly compensated for the total cost of managing the roofing project, not just for their direct labor and materials. This is crucial for the contractor’s business sustainability.
  2. Quality of Work: Recognizing O&P in claim settlements allows contractors to maintain high standards without cutting corners to reduce costs. It ensures they manage the project efficiently and adhere to high-quality standards without financial constraints.
  3. Comprehensive Coverage: For homeowners, ensuring that their claim includes overhead and profit means that the insurance coverage fulfills its role of restoring their property to its pre-loss condition without additional out-of-pocket expenses.

Strategies for Homeowners

If you are a homeowner dealing with a roofing insurance claim, here are a few tips to navigate the inclusion of overhead and profit:

  • Review Your Policy: Understand the specifics of your insurance policy concerning O&P. Some policies may clearly state the conditions under which O&P is covered.
  • Hire a Public Adjuster: If you encounter resistance from your insurance company regarding the inclusion of O&P, consider hiring a public adjuster. These professionals can negotiate with the insurance company on your behalf to ensure a fair settlement.
  • Documentation and Justification: Provide detailed estimates from your contractor that separately list overhead and profit. Justify the need for a general contractor by outlining the complexity and scope of the work involved, especially if multiple trades are needed.
  • Professional Advocacy: Engaging a contractor who is experienced in dealing with insurance claims can be beneficial. They can help in articulating the need for a comprehensive claim that includes O&P, based on industry standards and the specific requirements of the project.

Understanding overhead and profit in the context of roofing insurance claims not only helps in ensuring that you are fully compensated for all aspects of the restoration but also aids in managing the project efficiently, ultimately leading to a successfully restored property.

Contact Us

It’s important to communicate with your roofing contractor, and to select a contractor who knows how many trades will be involved, so that you can be properly reimbursed by your insurance provider. Our team at Indy Exterior Services is skilled at handling complexities in restoration projects and negotiating with adjusters to settle things correctly. Contact us today for a free consultation.