How Insurance Claim Estimates Work

What a claim estimate is

An estimate is a priced list of the work needed to repair covered damage. The insurer’s adjuster writes one. If you hire a public adjuster or get a contractor’s bid, you may end up with two or three, and comparing them line by line is often how a disagreement gets sorted out.

Florida gives you the right to see the insurer’s version. A residential property insurer must send you a copy of any detailed estimate its adjuster generates within 7 days after it is generated, although it does not have to create one if it is not reasonably necessary for the claim (s. 627.70131(3)(e)). A preliminary or partial estimate must say, in bold capital letters, that it may be revised as the insurer keeps evaluating the claim (s. 627.70131(6)(a)).

Public adjusters have a similar duty on residential and condo unit owner claims. Within 60 days after the contract, the adjuster must give you a written estimate of the loss that includes an itemized, per-unit estimate of the repairs, with equipment, materials, labor and supplies, in line with accepted industry standards. The adjuster keeps it for at least 5 years and must make it available to you, the insurer and the Department of Financial Services on request (s. 626.854(12) and (19)).

Scope, quantities and unit prices

Every line item answers three questions: what work, how much, and at what price.

• Scope. The task itself, written room by room or area by area: remove and replace drywall, detach and reset a toilet, tear off and replace roofing, paint a ceiling.
• Quantity and unit. How much of that task, in units such as square feet, linear feet or each. Quantities usually come from measurements or a sketch of the property.
• Unit price. The cost per unit for materials, labor and equipment. Multiply by the quantity, add any sales tax on materials, and you have the line total.

Most estimates are written in estimating software. Verisk, which makes Xactimate, says insurance carriers, independent adjusters and restoration contractors all use it to write property estimates. It describes the process as capture (sketch and measure), scope (add line items), price and report, and says each estimate uses the price list for the loss location, so line items reflect labor and material costs in that market. Other estimating programs exist, and some contractors price from their own costs instead.

That is why two estimates for the same damage can differ. One may have more rooms or tasks in the scope, different measurements, or a different price list. When you compare, compare scope and quantities first. Price differences matter less if both sides are not pricing the same work.

Parts of a claim estimate and what to check

From replacement cost to the check

Add up the line items and you get the replacement cost value, or RCV: what it costs today to do the work with materials of like kind and quality. The estimate then subtracts depreciation, a reduction for the age and condition of what was damaged, to reach actual cash value, or ACV.

On a replacement cost policy, Florida requires the insurer to pay at least the ACV of the loss, less the deductible, at first, then pay the remaining amounts as the work is done and expenses are incurred. After a total loss of a dwelling, the insurer must pay replacement cost without holding back depreciation (s. 627.7011(3)(a)). The standard homeowners form likewise pays no more than ACV on buildings until actual repair or replacement is complete, and settles personal property, carpeting and household appliances at ACV unless your policy adds replacement cost for them (ISO HO 00 03 sample).

The summary page shows the math: RCV, depreciation, ACV, the deductible, any prior payments and the net amount. Our post on ACV vs RCV explains why the first check is usually smaller than the estimate total.

Overhead and profit, code upgrades and matching

Three items change an estimate’s total more than most people expect, and each depends on your policy and your job.

Overhead and profit. When a repair needs a general contractor to schedule and supervise several trades, some estimates add a line for that contractor’s overhead and profit. Whether it is included, and how it is figured, varies by insurer, policy and job, and it is a frequent point of discussion. Ask the adjuster to explain in writing if it was left off a multi-trade repair.

Code upgrades. Repairs can trigger current building code requirements. The standard homeowners form leaves those costs out of its loss settlement except as provided by its ordinance or law coverage, which in the sample form allows up to 10 percent of the dwelling limit. Florida requires insurers to offer law and ordinance coverage at 25 percent or 50 percent of the dwelling limit, and a homeowners policy is deemed to include the 25 percent option unless you rejected it in writing (s. 627.7011(1) and (2)). Your declarations page shows which you have.

Matching. On homeowners policies that pay repair or replacement cost, when replaced items do not match in quality, color or size, the insurer must make reasonable repairs or replacement of items in adjoining areas, unless the policy provides otherwise (s. 626.9744(2)). Matching often decides whether a roof or floor is patched or replaced. The roof repair vs roof replacement guide covers that question for roofs.

How to read an estimate, page by page

Set aside an hour, print the estimate if you can, and walk your property with it. Work in this order:

• Start with the summary page. Find the RCV, depreciation, ACV, deductible, prior payments and net claim, and check that the math adds up.
• Find the price list name and date, often shown on the first page or the summary. It should usually match where your property is and roughly when the loss happened.
• Read the room or area list. Every damaged room, roof slope and elevation should appear.
• Go line by line: description, quantity, unit, unit price, tax, overhead and profit if any, RCV, depreciation and ACV. Check quantities against your own measurements.
• Look at the age and life assigned to depreciated items. Ask how they were chosen if they look wrong.
• Note what is missing: tear-out, haul-away, drying, permits, code work, contents and living expenses.

If something looks wrong, our guide to signs of an underpaid claim lists what to check and what to do next. At Adjusterman, estimates are written line by line in the same kind of estimating platform carriers use, priced to your market; our process shows how. If you have covered damage and a carrier estimate in hand, a free claim review can tell you whether anything looks missing. See homeowners claims.