If you’ve recently filed an insurance claim for property damage and reviewed the estimate, you might have noticed a line item labeled “O&P.” This often leads to the question: what is O&P on insurance estimate? For many homeowners, it can be a confusing detail hidden among repair costs and construction terms.
O&P stands for "Overhead and Profit," and it’s a significant part of the total cost of a project, especially when dealing with restoration or general contracting work. In this article, we’ll break down what O&P really means, when it applies, and why it’s essential for fair insurance reimbursement—especially in cases handled by State Restoration Services.
Understanding O&P – What Does It Mean?
To understand what is O&P on insurance estimate, you need to look at the roles and responsibilities of general contractors. Overhead refers to the general costs a contractor incurs to run their business—things like office rent, utilities, insurance, and salaries. Profit is the margin they earn for managing the project and taking on financial risk.
Combined, O&P is typically expressed as a percentage—commonly 10% for overhead and 10% for profit—added to the total labor and material cost. So, when you're looking at your estimate, the inclusion of O&P means the contractor will be compensated fairly for coordinating and completing the job.
Why Insurance Estimates Include O&P
The key question remains: what is O&P on insurance estimate, and why does it show up? Insurance companies include it when a job requires the coordination of multiple trades (such as roofing, drywall, plumbing, and electrical) that would typically need a general contractor to manage.
This added complexity justifies a general contractor’s involvement, and thus, their O&P. If your claim covers fire damage, flooding, or major storm repair, it likely includes this additional charge.
When O&P Is Applied in Insurance Claims
To truly grasp what is O&P on insurance estimate, it’s important to understand when it is and isn’t applied. It is generally included when:
• The project involves three or more trades
• A licensed general contractor is needed
• The scope requires project coordination and scheduling
However, if the repairs are simple—say, only roof shingles or window panes—insurance companies may not apply O&P. This leads to disagreements that State Restoration Services can help you navigate to ensure proper compensation.
How O&P Is Calculated
Now that we know what is O&P on insurance estimate, let’s look at how it’s calculated. Suppose your claim includes $20,000 in direct repair costs. A 10% overhead adds $2,000, and another 10% for profit adds $2,000 more. That brings the total estimate to $24,000.
These amounts are not arbitrary—they reflect the business realities contractors face and ensure the job is completed professionally and reliably.
Common Misconceptions About O&P
There are a few myths surrounding what is O&P on insurance estimate. Some people believe:
• It’s a bonus or unnecessary upcharge
• It only applies to large commercial jobs
• Homeowners never actually pay it
In truth, O&P ensures that the contractor managing your restoration project is fairly compensated and that the work meets quality standards. It’s not a luxury—it’s a necessity when coordinating complex jobs.
O&P and Insurance Company Policies
Many homeowners ask, “what is O&P on insurance estimate, and why won’t my insurance cover it?” The answer often lies in individual policy terms and the adjuster’s interpretation.
Some insurance companies resist paying O&P unless it’s clearly justified. Others include it routinely for qualified claims. State Restoration Services works directly with adjusters to explain why O&P is necessary for certain projects, ensuring that nothing is left out of your reimbursement.
Why O&P Is Important for Restoration Projects
Especially in damage repair and emergency restoration, the question “what is O&P on insurance estimate” becomes critical. These jobs are rarely handled by a single trade. Fire restoration, for example, can involve:
• Demolition
• Mold remediation
• Electrical rewiring
• HVAC repair
• Structural rebuilding
Each of these requires specialized contractors. Without O&P, the general contractor coordinating all this would be undercompensated, leading to lower quality results and project delays.
How State Restoration Services Advocates for You
State Restoration Services ensures that every estimate fairly reflects the true cost of restoring your home. When adjusters question “what is O&P on insurance estimate,” our team provides detailed justifications, including:
• Project complexity
• Number of trades involved
• Risk and liability factors
• Time management and scheduling requirements
Our goal is to help homeowners receive full coverage for all legitimate repair costs, including overhead and profit.
How O&P Affects Your Final Payout
Some homeowners worry that including O&P will reduce their cash payout or affect what the insurance company reimburses. That’s not how it works. In most cases, insurance payouts are broken into actual cash value (ACV) and recoverable depreciation.
O&P is part of the recoverable portion, released after the work is completed and verified. If you don’t use a general contractor, or the job doesn’t involve multiple trades, the insurer may withhold this amount.
Working with a General Contractor
Understanding what is O&P on insurance estimate also means recognizing the value a general contractor brings. They:
• Manage schedules and subcontractors
• Pull permits and ensure code compliance
• Handle unexpected issues or delays
• Maintain safety and quality control
Without this management, your project could face serious complications. O&P compensates the contractor for this essential role.
Tips for Homeowners Filing Insurance Claims
If you’ve just asked, “what is O&P on insurance estimate,” here are practical tips:
1. Request a full, itemized estimate showing all costs, including O&P
2. Hire a licensed general contractor early in the process
3. Ask your contractor or restoration team to speak directly with the adjuster
4. Document damage thoroughly with photos and written assessments
5. Follow up regularly to ensure O&P isn’t mistakenly omitted
FAQs About O&P in Insurance Estimates
1. What is O&P on insurance estimate?
It refers to overhead and profit—a standard fee (usually 10% + 10%) for the general contractor managing your project.
2. Is O&P always included in estimates?
No, it’s typically included when the job involves multiple trades or complex coordination.
3. Do insurance companies always pay O&P?
Not always. They may question it or require justification. Some policies cover it clearly, while others leave room for interpretation.
4. Can I ask for O&P if it’s not included?
Yes. If your project qualifies, your contractor can request its inclusion with supporting documentation.
5. Will I get less money if O&P is added?
Not if the work is done properly. O&P is part of your full repair budget, not a deduction.
6. How do I know if my job qualifies for O&P?
Ask your contractor or a restoration specialist. Jobs requiring multiple specialties usually qualify.
Conclusion
So, what is O&P on insurance estimate? It’s a crucial part of any comprehensive claim involving multiple trades and complex repairs. Overhead and profit ensure your general contractor is properly compensated, allowing them to manage your project effectively and deliver high-quality results.
State Restoration Services has the experience to ensure your claim is complete, accurate, and fair. If your project involves more than one trade, don’t leave O&P off the table—it could be the key to fully restoring your home.
View our insurance claim page for more information, or book free inspection here.