Overhead and Profit (O&P) in Insurance Claims: When It's Owed

Overhead and profit (O&P) is what a general contractor charges to manage your repair, on top of the cost of labor and materials. It is often figured as about 10% overhead plus 10% profit, and insurers are generally expected to include it when your repair is complex enough that you'd reasonably need a general contractor.

Whether O&P is owed on your claim depends on your policy wording, your state's law and the scope of the work. This guide explains what O&P is, when it usually applies, and how to ask for it if it's missing from your estimate.

What is overhead and profit?

When a job needs several kinds of work, such as roofing, drywall, painting and electrical, a general contractor (GC) usually hires and schedules those trades, pulls permits and supervises the job.

United Policyholders ↗ (UP), a national nonprofit for policyholders, explains that O&P "covers a General Contractor's time and expenses and is calculated as a percentage of the total cost of a job."

• Overhead covers the GC's business costs, such as office, insurance, vehicles and supervision.
• Profit is what the GC earns for taking on the job.

UP notes that where O&P is "10 and 10," it is charged as 20% on top of the total job estimate. That is a common way it appears, not a legal rate. Your contractor's actual O&P may differ.

How it shows up in your estimate

Insurer estimates are usually line by line. O&P, if included, often appears near the bottom as separate overhead and profit lines. If you don't see those lines, ask the adjuster whether O&P was included or left out on purpose.

When is overhead and profit typically owed?

There is no single national rule. But a common thread runs through policyholder guidance and some court decisions: O&P is part of what it costs to repair your home when you are reasonably likely to need a general contractor.

The "three trades" rule of thumb

Many adjusters use an informal rule that O&P applies when a job involves three or more trades. UP describes this as a longstanding rule of thumb, but warns that it "does not seem to have any binding authority in most states" (UP ↗).

That cuts both ways. An insurer shouldn't deny O&P just because you count two trades instead of three if the job truly needs coordination. And a three-trade count alone may not settle it if the work is simple.

Florida's Supreme Court on O&P

In Trinidad v. Florida Peninsula Insurance Co., 121 So. 3d 433 (Fla. 2013) ↗, the Florida Supreme Court held that overhead and profit are part of replacement cost "where the insured is reasonably likely to need a general contractor for the repairs." It also held that the insurer could not hold back that payment until repairs were actually made.

Two important limits:

• The court said its analysis "applies only to the version of the statute in effect in 2008." Florida's replacement cost statute, s. 627.7011 ↗, has been amended since then and now lets insurers pay replacement cost amounts beyond ACV "as work is performed and expenses are incurred."
• It is a Florida decision about one policy and one statute. It does not decide what your policy or your state's law requires.

Other states

Outside Florida, the rules are less settled and often turn on your policy wording and whether the payment is ACV or replacement cost. UP describes the approach in Texas, for example, as unsettled (UP ↗). UP's guidance says many policyholders "are entitled to collect insurance benefits to cover them in most scenarios," and quotes an industry adjusting reference stating that "any estimate of actual cash value should include O & P" (UP ↗). That is policyholder-side guidance, not law in your state. If an insurer flatly refuses O&P on a large, complex repair, a short consultation with a licensed attorney in your state can clarify your rights.

What if you act as your own general contractor?

Some homeowners plan to manage the repair themselves. UP says a property owner who acts as their own GC "can make an argument" that they're entitled to O&P, and that owners who documented the time and resources a GC would provide have been paid it (UP ↗).

Expect pushback. If you go this route, keep a log of your hours, calls, scheduling, permits and supervision.

How to ask for overhead and profit

1. Read your estimate. Look for O&P lines. Note whether the insurer applied it to the whole job, part of it or none.
2. Count and list the trades. Write down each type of work needed, such as roofing, framing, drywall, insulation, flooring, painting, electrical or plumbing.
3. Explain why a GC is needed. Coordination between trades, permits, inspections, sequencing and code work all support the need.
4. Get contractor estimates. UP recommends getting two independent estimates from licensed, reputable contractors you would actually hire (UP ↗). A GC's bid that lists O&P is strong evidence.
5. Ask in writing. Send a short letter or email: list the trades, attach the GC estimate, and ask the insurer to add O&P or explain in writing why it was left out.
6. Check your state's estimate rules. Some states give you specific rights. In California, if you get a higher written estimate, the insurer must pay the difference, name a contractor who will do the work for its price, or reasonably adjust your estimate and send you a copy (10 CCR 2695.9(d) ↗).
7. Escalate if needed. Ask for a supervisor, then consider your state insurance department, appraisal or professional help. See our guide to an underpaid insurance claim.

O&P and the depreciation holdback

On replacement cost policies, UP suggests asking whether O&P is included in the first ACV payment (UP ↗). Ask before you start work whether O&P is in the first check, the held-back amount or neither, so you know what is still owed. Our ACV vs. replacement cost guide explains holdbacks.

Common insurer arguments, and how to respond

• "It's only two trades." Explain the coordination actually needed and attach a GC's bid. The three-trade rule isn't binding law in most states, per UP.
• "You haven't hired a contractor yet." Ask whether your policy and state law require you to hire one before O&P is paid. In the Trinidad case under Florida's 2008 statute, the insurer could not hold back O&P pending repairs.
• "O&P is only paid when the work is done." Ask the insurer to point to the policy language and state law it relies on.

When a public adjuster may help

O&P disputes are common on larger repairs. A licensed public adjuster can write a full estimate, document why a GC is needed and negotiate the line items. On a big, multi-trade loss, adding a 20% item that was left out can be a meaningful amount.

It may not be worth paying a fee if your repair is small or involves one trade, or if the insurer already included O&P. Public adjuster fees come from your claim payment; see public adjuster fees. If the dispute is a legal question about what your policy means, an attorney is the right professional.

If your estimate looks incomplete, get matched with a licensed public adjuster.

This guide is general information, not legal advice. Court decisions and statutes change, and rules differ by state.

Frequently asked questions

What does O&P mean on an insurance estimate?

It stands for overhead and profit, the general contractor's charge for managing and coordinating the repair. United Policyholders notes it's often shown as "10 and 10," or 20% on top of the job cost.

Is overhead and profit always owed?

No. It depends on your policy, your state and whether you're reasonably likely to need a general contractor. Simple single-trade repairs often don't include it.

Is the three-trade rule a law?

Generally not. United Policyholders says the three-trade rule of thumb "does not seem to have any binding authority in most states."

Can I get overhead and profit if I don't hire a general contractor?

Sometimes. In Florida, the state Supreme Court held under the 2008 statute that O&P was part of replacement cost when a GC was reasonably likely to be needed, even before repairs. Other states and policies differ, so ask your insurer for its reasons in writing.

Is O&P included in actual cash value payments?

It depends on your state and policy. Policyholder groups argue it should be when a GC is reasonably likely to be needed, but the law is not uniform. Ask your insurer to explain its position in writing.

Who decides whether a general contractor is needed?

Start with the scope of work and a licensed contractor's opinion. If you and the insurer still disagree, options include appraisal, a state insurance department complaint or advice from an attorney.