Overhead and Profit in Restoration: When Insurers Actually Pay It

0:00 What Insurers Do to Your O&P
If you run a restoration company, there is a line item on almost every estimate you submit that insurance carriers are trained to deny, reduce, or quietly remove, and most contractors let them get away with it. That line item is O and P, overhead, and profit. In this video, we’re breaking down exactly what it is when you’re owed it, why carriers fight it, and the four steps that change how much you collect starting on your next job. Quick pause for context.

0:33 Who Jeremy Is and What This Covers
I’m Jeremy with PushLeads and helping restoration contractors and homeowners with a property claim when in search is what I do all day. My first sites hit Google’s first page back in 2007, and I never stopped. What you’re getting here is what overhead and profit means on an insurance estimate, the three trade rule, when carriers owe it, and how contractors get it approved. A 2026 exact where industry analysis found that restoration companies consistently and properly documenting their O and P entitlement collect 22 to 28% more per job than companies that accept the initial estimate without pushing back. That is not a small difference. That is the gap between a profitable year and a break even year, and it compounds across every single job you run.

1:23 The 10 and 10 Formula Explained
Here is what that gap looks like in real dollars. At 200 jobs a year averaging $10,000 each, the standard 10 and 10 O and P formula adds $2,000 per job. Companies that collect at bank $400,000 and O and P annually. Companies that accept the first estimate collect zero. Same jobs, same work, same trades, two completely different financial outcomes. So what exactly is the 10 and 10 formula? It’s two separate 10% charges added on top of all your direct job costs. The first 10% is overhead. It covers office rent, administrative salaries, vehicle costs, insurance premiums, software subscriptions, certifications, and equipment depreciation. The second 10% is profit. You’re margin for managing the project, taking on risk, and coordinating everything from scope to completion. On a $10,000 job, that’s $1 ,000 each, $2,000 total. 10% is the recognized floor. If your actual overhead runs higher, you have the right to document and request that real number.

2:36 Why O&P Benefits Carriers Too
Here’s a point that almost never gets made. O and P doesn’t just benefit your company. It funds the infrastructure that insurance carriers depend on. The IICRC certifications adjusters require you to hold cost money every year. The thermal cameras and professional drying equipment they expect you to show up with depreciate every month. Being available 24 hours a day, seven days a week to respond the same day a claim comes in, requires staffed, equipped, and insured operations. O and P pays for that. Without it, you’re subsidizing the carrier’s claim out of your own margin. When is O and P actually owed?

3:17 The Three-Trade Rule and Policy Types
The most commonly cited standard is the three -trade rule. If a project requires three or more distinct trades, water mitigation, drywall, painting, flooring, the contractor coordinating those trades is entitled to O and P. A 2026 claims journal analysis trace this rule directly to Zactimate’s pricing structure, but courts and state insurance departments have gone further. Finding O and P warranted whenever a contractor provides full project management, regardless of exact trade count, policy type matters too. Replacement cost value policies typically support O and P. Actual cash value policies may calculate it on a reduced base. Verify every time.

4:00 Three Mistakes That Kill Your Claim
Now let’s talk about the mistakes that kill your O and P before the adjuster ever opens the file. The first is letting Zactimate default to zero because the estimate type wasn’t set to general contractor. That one setup error wipes out 20 % of your jobs value instantly. The second is vague scope documentation. Failing to name every trade explicitly upfront is the single biggest reason supplement requests get rejected. The third is signing TPA agreements without reviewing them first. Some third -party administrator programs contractually exclude O and P once signed that denial is nearly impossible to fight after the fact. So what do you actually do to collect?

4:44 Four Steps to Collect O&P
Four steps. First, document every trade before work starts, use photos, moisture readings, and thermal imaging to establish the full scope. Name every trade in your initial scope notes, mitigation, demo, drywall, painting, flooring, cabinetry, be specific. Second, set Xactimate up correctly every single time, set the estimate type to general contractor, and have a senior estimator check the O and P line before every submission. Third, respond to every denial in writing within 14 days, include your trade list, project management activities, overhead documentation, and any applicable state rulings. Written responses create paper trails, verbal conversations don’t. Fourth, review every TPA vendor agreement with an attorney before you sign. The REA specifically recommends this. Presigning review beats post -denial supplementing every time.

5:41 Overhead vs Profit Defined Clearly
Let’s be clear about the difference between overhead and profit because they cover entirely different things. Overhead is the 10% that covers every cost your business carries, whether or not a specific job is running, rent, staff salaries, truck insurance, software, training, certifications, equipment reserves. Profit is the 10% you earn for actually managing the project, coordinating the adjuster, scheduling trades, handling documentation, and taking on the financial risk of completion. Removing either one means you are personally subsidizing the insurance company’s claim settlement out of your own operating budget. That is not how this is supposed to work.

6:25 Four Carrier Denials and Your Counters
Carriers use four main arguments to deny O &P, and every one of them has a documented counter position. When they say only one trade was involved, your response is that project management, adjuster coordination, documentation, and equipment deployment are general contracting functions regardless of crew structure. When they say your TPA excludes it, the prevention is pre -signing review. There’s little to do after the fact. When they claim the policy doesn’t cover it, request the full policy document and look for restoration markup language in the conditions section. And when they argue overhead is already in your unit pricing, cite exacting its own documentation, line item unit overhead, and general contracting overhead are two entirely separate cost categories. Here’s the argument that almost never gets made but should be made in every dispute. When restoration companies are systematically underpaid, they cut investment in equipment, certifications, and trained staff, poorly dried structures develop secondary mold damage. Under resourced contractors, mishidden moisture, the insurer ends up paying far more in supplemental claims and litigation than they ever save by denying O &P in the first place. Proper O &P payment funds, the professional standards that make claims close correctly the first time. That benefits everyone, including the carrier.

7:48 Annual Revenue Math by Job Size
The math is simple and it should make every restoration owner uncomfortable if they haven’t been collecting. On a $5,000 average job, $200 a year generates $200 ,000 in O &P at the 10 and 10 rate. On a $10,000 average job, that’s $400,000. On a $15,000 average job, $600,000. On a $20,000 average job, $800,000 annually. Every job you complete without collecting full O &P is a job where you funded part of the insurance company’s settlement out of your own margin.

8:20 Industry Quote Every Contractor Needs
Mark Springer, technical advisor for the Restoration Industry Association, put it plainly. Overhead and profit aren’t gravy on top of a job. They’re the cost of doing business. Without O &P, restoration companies cannot maintain the certifications, insurance, and equipment that insurance companies require them to have. That quote belongs in every written response you send to a carrier who tries to deny this charge. Let’s bring it back to the numbers that matter. 22 to 28% more revenue per job for companies that document correctly. That’s from a 2026 Exactware Analysis, $400,000 in annual O &P revenue for a company running $210,000 jobs. And 20% is the combined charge, 10 overhead plus 10 profit, that belongs on every professionally managed Restoration estimate.

9:16 Track O&P Like a Core Benchmark
Track your O &P collection rate the same way you track close rate and job count. It is a core financial benchmark for your business. Every job you complete without full O &P is a job where you paid part of the insurance company’s claim out of your own margin. The fixes documentation before work starts, correct exacting it set up every time, and structured written responses to every denial. PushLeads works with restoration companies to build the digital presence and lead systems that put you in front of more jobs and tracks the metrics that matter, including O &P collection rates. As part of a complete business performance picture, get a free Restoration Visibility teardown at the link in the description or call 828 -348 -7686.