Overhead and Profit (O&P): The Complete Guide for Roofing Contractors

Overhead and profit (O&P) is the most misunderstood — and most frequently denied — line item in roofing insurance claims. Insurance adjusters routinely exclude it from estimates, claiming it's "not applicable" or "already included." It isn't. Here's everything you need to know to get O&P approved on every qualifying claim.

What Is Overhead and Profit?

Overhead and profit is a standard markup that general contractors add to the cost of subcontracted work to cover their business expenses and profit margin. In the insurance restoration industry, it's typically calculated as 10% overhead + 10% profit (the "10 and 10" standard), applied to the total direct cost of the repair.

The concept is straightforward: when a roofing contractor manages a project that involves multiple trades or significant coordination — not just showing up and nailing shingles — they incur overhead costs (insurance, vehicles, office staff, licensing, equipment) and are entitled to a reasonable profit margin. O&P compensates for those costs.

When Are You Entitled to O&P?

The standard industry rule is that O&P applies when a general contractor is involved in coordinating a project that requires three or more trades. For roofing claims, this threshold is commonly met when the project includes:

• Roofing replacement plus gutters and downspouts
• Roofing plus interior repairs (drywall, insulation, paint)
• Roofing plus HVAC, electrical, or plumbing work
• Roofing plus structural repairs (decking, fascia, soffits)
• Any project requiring a general contractor's license to pull permits

Even on projects that don't technically meet the three-trade threshold, many policies and state regulations entitle the homeowner — and by extension, the contractor — to O&P as a standard component of a fair settlement. Check your state's Department of Insurance guidelines; many states have specific rules about when O&P must be included.

Why Adjusters Deny O&P (And Why They're Wrong)

• "You're a specialty contractor, not a GC": If you're coordinating multiple trades, managing subcontractors, pulling permits, and carrying general liability insurance, you're functioning as a general contractor regardless of how you classify yourself.
• "O&P is already included in the line item prices": It isn't. Xactimate's database prices represent direct costs only. O&P is a separate markup applied to the total.
• "The project only involves one trade": If interior repairs are needed as a result of the roof damage, the project involves multiple trades. Document all affected areas.
• "The homeowner is doing their own GC work": This is irrelevant to the claim settlement. The insurance company owes the cost to restore the property to its pre-loss condition, which includes O&P.

How to Write an O&P Supplement Letter That Gets Approved

An effective O&P supplement letter needs to do three things: establish that you qualify for O&P, cite the policy language or industry standard that entitles you to it, and present the calculation clearly.

Step 1: Document All Trades Involved

List every trade involved in the project. For a typical hail-damaged roof with interior water intrusion, this might include: roofing, gutters/downspouts, attic insulation, drywall, interior paint, and possibly electrical (if ceiling fixtures were damaged). Each trade is a separate line item in your documentation.

Step 2: Cite the Policy Language

Most homeowner's insurance policies include language about "reasonable contractor charges" or "general contractor fees." Quote the specific section of the policy that supports your O&P claim.

Step 3: Reference Industry Standards

The Xactimate pricing database explicitly excludes O&P from its line item prices, which means it must be added separately. Cite this in your letter. Many state insurance regulations also recognize O&P as a legitimate component of a fair settlement.

Step 4: Present the Calculation

Show your math clearly: Total direct cost × 10% overhead = overhead amount. Total direct cost × 10% profit = profit amount. Present both as separate line items. Do not lump them together as a single "O&P" line — adjusters are more likely to approve two clearly labeled line items than a single combined charge.

Sample O&P Supplement Language

"This project requires general contractor coordination of the following trades: roofing, gutters and downspouts, attic insulation replacement, drywall repair, and interior paint. Per industry standard and consistent with Xactimate's pricing methodology (which excludes general contractor overhead and profit from direct cost line items), we are requesting the standard 10% overhead and 10% profit markup on the total direct cost. Overhead: $[AMOUNT]. Profit: $[AMOUNT]. Total O&P: $[AMOUNT]."

What to Do When O&P Is Denied

If the adjuster denies O&P after receiving your supplement letter, escalate in this order: (1) Request a supervisor review, citing your documentation of multiple trades and the policy language. (2) File a complaint with your state's Department of Insurance if the denial appears to violate state regulations. (3) Invoke the appraisal clause in the policy if available.

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Supplement Tool generates professional roofing supplement letters with proper O&P language, trade documentation, and policy citations — in under 90 seconds. Try 3 free letters — no card required. See also: Roofing Supplement Letter Guide and Xactimate Line Items Adjusters Exclude.