The number on the insurance estimate is not the number you have to work with. Every roofing contractor learns this the hard way — usually after signing a contract based on the RCV, then discovering the actual money available to buy materials and pay the crew is thousands less.
That gap has a name: overhead and profit. O&P. And it's the most misunderstood 20% in the roofing industry.
Key Insight: On a line item with an RCV of $2,000, the carrier includes 20% for overhead and profit (10% overhead + 10% profit) — that's $400. Your TRUE BUDGET is $1,600. If you price the job against the $2,000, you're spending money that was never yours. And when a supplement adds $2,000 to the claim, only $1,600 of it is actually available to work with.
The Math: $2,000 → $400 → $1,600
Here's the real example, the one that shows up on every roofing claim:
| Item | Amount |
|---|---|
| RCV — insurance says | $2,000.00 |
| O&P — 20% (10% overhead + 10% profit) | -$400.00 |
| TRUE BUDGET — what you actually have to work with | $1,600.00 |
The trap is that most contractors look at the $2,000, build a scope of work that costs $2,000 to deliver, and then wonder why the job runs at 5% margin. They built the job against the gross number. The $400 wasn't a bonus — it was carved out at the top, before a single shingle was ordered.
What O&P Actually Is
In Xactimate, the standard O&P is 20% — split as 10% overhead and 10% profit. Overhead covers your office, your trucks, your insurance, your project management. Profit is what's left after everything — and it's the only number that actually grows your company.
Here's where it gets interesting: who keeps that 20% depends entirely on how the deal is structured. There are four deal modes we see in the field:
| Deal Mode | Who Gets What |
|---|---|
| GC Keeps Both | You sub the trade — you keep all 20% O&P. |
| Split | Contractor keeps 10% profit, you keep 10% overhead. |
| Contractor Keeps Profit | Contractor doing their own work keeps the 10% profit; GC charges 10% overhead. |
| No O&P | Rare — no overhead or profit applied at all. |
Your true budget changes with the deal mode. If you're the GC keeping both, the full $1,600 is your working budget plus $400 of margin. If you split, $1,600 is still your working budget, but $200 of the O&P belongs to the contractor — your true budget for the work itself is different. Structuring the deal before you price the job is not optional; it's the difference between a profitable job and a donation.
Why the Trap Hurts: Supplement Math
Here's the part that surprises contractors: supplements add to the true budget more slowly than they add to the RCV. Approve a $2,000 supplement and the claim grows by $2,000 — but your working budget grows by $1,600. The other $400 is O&P on the new money, and it belongs to whoever holds the deal mode.
That's why supplement strategy has to be built around true budget, not RCV. When you're evaluating whether a supplement is worth fighting for, run it through the real math: how many true-budget dollars does this line item add? A $2,000 line item you'll never get approved adds zero. A $400 price correction on shingles that's documented with a supplier invoice adds $320 of true-budget dollars — real money you can bank.
Carrier Behavior Makes It Worse
Different carriers estimate the same roof differently — and that changes your true budget before you even start. Two examples contractors report in the field:
State Farm is known for rounding measurements down. Contractors commonly report that measurements on State Farm estimates get rounded down before they hit the line item — on a 29.7 square roof, you may get paid for 29. Your true budget ends up smaller than the roof you're standing on, before a single supplement is filed.
Allstate adjusters often push back on ridge vent replacement. It's a pattern contractors report across markets. The line item exists in the scope of other carriers, but with Allstate you plan to fight for it — and budget accordingly. Knowing the pattern in advance changes how you price the job and where you put your supplement effort.
Carrier pricing adjustments compound the problem. The same line item prices differently by carrier — as an illustration from our tracking, some carriers run roughly 10-20% below standard Xactimate pricing while others run a few percent above. Same roof, same materials, different true budgets. If you price every claim the same way, you're overbidding on some carriers and underbidding on others.
Pro tip: Identify the carrier before you price the job. Carrier-specific rounding, denial patterns, and pricing adjustments change the true budget on every claim — and they're knowable before you sign the contract.
Working Inside the True Budget
Once you know the true budget, the strategy writes itself:
- Price the job against true budget, never RCV. If the true budget can't cover your costs, the gap has to be recovered in the supplement — or the job isn't worth taking.
- Chase true-budget dollars, not RCV headlines. A $2,000 item you can't justify adds $0. A documented $400 price correction adds $320 you can actually spend.
- Document everything. Carrier pricing adjustments and measurement rounding are defeated the same way: supplier invoices and measured photos attached to the supplement. Specific beats general, every time.
See Your True Budget on Every Line
This is exactly why ESXPress shows a per-line O&P breakdown on every conversion: RCV, overhead, profit, and true budget — for each line item and the job total, with the deal mode applied. You see the $2,000 → $400 → $1,600 math on every line of every claim, before you price a single job. No more signing contracts against money that was never yours.
The contractors winning in 2026 aren't the ones who bid the highest RCV. They're the ones who know their true budget on every claim — and build their supplement strategy around the dollars they can actually bank.
Frequently Asked Questions
Is O&P always 20%?
20% — 10% overhead plus 10% profit — is the standard in Xactimate, but it varies. Some carriers apply less, some deal modes reallocate who keeps what, and some scopes apply no O&P at all. Always check the actual estimate and compute the true budget from the O&P that's actually on it.
Who gets the O&P when I sub the trade?
It depends on the deal mode. If you're the GC and you sub the trade, you keep all 20% — your true budget is the RCV minus the O&P, and the O&P is your margin. In a split, the contractor keeps 10% profit and you keep 10% overhead. Structure this before you price the job, not after.
Does a supplement add 20% more to my budget?
No — and this is the trap. A $2,000 supplement adds $2,000 to the RCV, but only $1,600 to your true budget, because O&P is carved out of the new money too. Always evaluate supplement line items by their true-budget dollars, not their RCV headline.
See the per-line O&P breakdown and true budget on your next claim — free 14-day trial →