Most restoration companies lose money before they ever start a job. Not because the work is bad, but because they accept default Xactimate pricing without questioning whether it actually covers their costs. If you’re running jobs based on whatever the software spits out, you’re probably leaving 15-30% of your revenue on the table.
Xactimate is used by 80% of top property insurance carriers and processes more than 20 million claims worth over $125 billion each year (Verisk, 2025). It’s the industry standard. But “standard” doesn’t mean “fair,” and it definitely doesn’t mean “profitable.”
This guide covers how restoration company owners can build smarter pricing strategies inside Xactimate, defend those prices to adjusters, and stop giving away profit on every single job.
Why Default Xactimate Pricing Undervalues Your Work
Xactimate’s price list is updated monthly based on regional cost data. In theory, it reflects what restoration work costs in your area. In practice, the numbers often lag behind actual material costs, don’t fully account for skilled labor shortages, and fail to capture the overhead of running a 24/7 emergency service business.
“The biggest mistake I see restoration companies make is treating Xactimate pricing as gospel,” says Phillip Rosebrook, CR, a restoration industry consultant and co-founder of Business Mentors (C&R Magazine, 2025). “Those prices are a starting point for negotiation, not a ceiling.”
Here’s where the disconnect hits hardest. Xactimate’s default line items assume standard working conditions. But restoration work rarely happens under standard conditions. You’re pulling up carpet at midnight. You’re setting equipment in a flooded basement with standing water. You’re working around a homeowner’s schedule, their pets, and their panic. None of that shows up in a default price list.
According to a 2025 Cleanfax Benchmarking Survey, the average restoration company operates on gross margins between 45-55%. Companies that accept default pricing without adjustment consistently fall in the lower range, while those who build custom line items and negotiate effectively push above 55%.
How to Build Custom Line Items That Reflect Your Actual Costs
Start with your real numbers. Pull your last 12 months of financials and calculate your actual cost per labor hour, including wages, workers’ comp, payroll taxes, benefits, and vehicle expenses. For most restoration companies, that number is 30-50% higher than what Xactimate assumes.
Next, build custom line items for situations the default list doesn’t cover well. Some examples that commonly get missed:
- After-hours emergency response surcharges. Your crew responding at 2 AM costs more than a daytime call. Build a line item that captures it.
- Containment setup and teardown. Especially for mold remediation jobs, the time spent building negative air containment barriers is real labor that deserves its own line.
- Extended drying scenarios. When a job requires 7+ days of equipment placement instead of the typical 3-5, your monitoring visits, equipment rental costs, and documentation time all increase.
- Content manipulation charges. Moving, protecting, and replacing a homeowner’s belongings takes significant time. Don’t bury it in general labor.
According to the Restoration Industry Association, restoration companies that use customized Xactimate profiles report an average of 18-22% higher claim settlements compared to those relying on default pricing (RIA, 2025).
Defending Your Pricing to Insurance Adjusters
Here’s where most restoration owners stumble. You can build the most detailed estimate in the world, but if you can’t defend it to an adjuster, it doesn’t matter.
The key is documentation. Every line item needs supporting evidence. Photos, moisture readings, equipment logs, and time-stamped field notes. When an adjuster pushes back on a $1,200 containment charge, you show them exactly what was built, why it was necessary, and how long it took.
“Documentation is the difference between getting paid and getting pushed around,” says Ed Cross, Executive Director of the Restoration Industry Association (R&R Magazine, 2025). “The companies that win supplemental negotiations are the ones with irrefutable evidence.”
Thermal imaging and moisture detection technology gives you that evidence. A FLIR image showing moisture behind a wall is worth more than a paragraph of explanation. Platforms like Encircle let you create time-stamped photo documentation directly from the field, and that data feeds straight into your Xactimate estimate.
Here are three strategies that consistently win supplement negotiations:
- Submit your estimate with the claim, not after. When you write the initial scope with the adjuster present, you control the narrative. Waiting to supplement later puts you on defense.
- Use IICRC standards as your authority. The S500 (water damage) and S520 (mold) standards dictate what proper restoration requires. When your pricing aligns with industry standards, adjusters have less room to cut.
- Know the carrier’s own guidelines. Each insurance company has internal guidelines for what they approve. Building relationships with adjusters helps you understand what documentation they need to get your estimate approved by their desk reviewers.
Regional Pricing Benchmarks You Should Know
Xactimate pricing varies significantly by region. Water mitigation in Miami costs more than water mitigation in Des Moines, and your pricing should reflect that.
According to data from the Insurance Information Institute, the average water damage claim in the U.S. is approximately $12,500 as of 2025. But that average masks huge variation. Category 1 (clean water) jobs in low-cost markets might run $2,000-4,000, while Category 3 (black water) jobs in high-cost urban areas can easily exceed $25,000.
Here’s a rough breakdown of what restoration companies should expect per square foot by damage type:
- Water mitigation: $3-7.50 per square foot, depending on water category
- Fire and smoke damage: $4-7 per square foot for cleanup, excluding reconstruction
- Mold remediation: $10-25 per square foot, depending on scope and containment requirements
If your average job revenue falls consistently below these ranges, your Xactimate pricing needs adjustment.
The Financial Impact of Accepting Default Rates
Let’s put some real numbers to this. Say your company runs 200 jobs per year with an average ticket of $8,000. That’s $1.6 million in annual revenue. If you’re leaving 15% on the table through underpriced estimates, that’s $240,000 in lost revenue annually.
For a company operating at 50% gross margin, that $240,000 represents almost $120,000 in profit you never collected. That’s enough to hire another technician, buy a new truck, or fund a serious digital marketing campaign that generates even more work.
A 2024 study by the National Association of Home Builders found that construction material costs increased 33.9% between 2020 and 2024. If your Xactimate pricing hasn’t kept pace with those increases, your margins are eroding on every job.
Building a Pricing Review System
Don’t set your Xactimate profile once and forget it. Build a quarterly pricing review into your business operations.
Every 90 days, pull your job costing reports and compare actual costs against what Xactimate paid. Look for patterns. Are you consistently over budget on demolition? Is your equipment rental eating into margins? Are labor costs creeping up because you’re paying overtime to retain good technicians?
Assign someone on your team to own this process. In larger companies, that’s your estimator or operations manager. In smaller shops, the owner needs to carve out a few hours each quarter. The companies that track this data and adjust their profiles accordingly see measurable improvements in profitability within two to three quarters.
Your CRM and job management software should track job costs at a granular level. If your current system doesn’t break down costs by labor, materials, equipment, and subcontractors for each job, it’s time to upgrade.
Overhead and Profit: Don’t Leave O&P on the Table
Overhead and profit (O&P) is perhaps the most contested line item in restoration billing. The standard expectation is 10% overhead and 10% profit on top of job costs. Many adjusters push back on O&P, arguing that it only applies when a general contractor manages subcontractors.
That argument doesn’t hold up when your company is performing the general contracting function. If you’re managing the entire project, coordinating trades, handling permits, and communicating with the homeowner, you’ve earned O&P.
According to the National Association of Insurance Commissioners, disputes over O&P represent one of the top five complaint categories in property claims. Knowing your rights and documenting your general contracting role makes the difference.
Frequently Asked Questions
How often should I update my Xactimate pricing profile?
Review and update your custom line items and pricing at least quarterly. Xactimate’s price list updates monthly, so your customizations should stay current with those changes plus your own evolving cost structure.
Can I charge more than Xactimate’s listed price?
Yes. Xactimate prices are estimates, not caps. If your actual costs exceed the listed price, you can submit supplemental documentation justifying the higher amount. Success depends on having thorough documentation.
What percentage of restoration claims require supplement negotiations?
Industry estimates suggest 40-60% of claims require at least one supplement. Companies with better initial documentation and pricing tend to need fewer supplements because their first estimate is more accurate.
Should I accept managed repair program pricing from insurance carriers?
That depends on your business model. Managed repair programs like Contractor Connection often pay below standard Xactimate rates in exchange for volume. Companies with high fixed overhead may benefit from the steady work, but the lower margins make it harder to grow. Evaluate the math for your specific situation before committing.
How do I know if I’m underpricing my restoration jobs?
Compare your actual gross margin to industry benchmarks. If you’re consistently below 50% gross margin on mitigation work, your pricing likely needs adjustment. Track job costs closely and compare them against what you’re billing.