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Why Aren’t Insurance Claims Estimates The Same?

If you were to hire a contractor to provide an estimate for a kitchen remodel, they likely would provide you with a one-page document that has some basic details about the scope of work and then a lump sum cost at the end. The pricing for the work may vary but the structure of the estimate would likely be similar. Lump-sum pricing in construction means that all costs, direct (those specific to the project) and indirect (the costs of being a business but not specific to an individual job), are accounted for. What are the basic cost considerations for an insurance claims estimate and why aren’t they all the same?

Basic Construction Cost Structure

Direct Costs aka Cost of Goods Sold (COGS)

  • Materials

  • Equipment

  • Labor

  • Permits and fees

  • Supervision

Indirect Costs aka Overhead

  • Real and necessary business costs that aren’t specific to an individual project. These may include rent, utilities, insurance, marketing, etc.


  • Real and necessary margin for a business to invest in growth.

Basic Construction Estimating Structure

  • COGS x Markup (percentage accounting for overhead and profit) + Tax = Sale Price

Typical Construction Estimate (example)

Kitchen Remodel


Solid oak cabinets, shaker-style doors

Quartz countertops

Subway tile backsplash (full height)

Undermount farm-style sink

Laminate flooring

Wallboard repairs and paint



Insurance Claim Estimates

For an insurance claim, if there were water damage to your kitchen, the scope and cost would be the same but the presentation likely would be much different. Often for insurance claims an estimating software called Xactimate is utilized. Xactimate utilizes unit-based pricing that is composed room by room and line by line. In contrast to the one-page document for the lump sum estimate for repairs, a similar repair would be several pages.

Insurance Claim Repairs (trimmed down example)

Kitchen Repair

Scope: (including, but not limited to)

Base cabinets at x price per linear foot

Upper cabinets as x price per linear foot

Glass panels for upper cabinets

Toe kick



Plywood sub-deck for countertop

Quartz countertop

Rounded edges

Undermount sink

Plumbing reset

Quantities for drywall repair with blend and texture broken out

Quantities for painted surfaces with priming broken out


Line item totals $14,250.00

Overhead (10% markup) $1,425.00

Profit (10% markup) $1,4250.00

Sub-total = $17,100.00

Sales tax (10%) $1,710.00

Total approved = $18,810.00

Insurance Claims Estimating Structure

The insurance claim scope is often more detailed, this line-by-line structure can be helpful but it can also be confusing. Xactimate can help create a common language between the contractor and the adjuster but it can create some confusion with the insured who isn’t familiar with the format. These estimates utilize unit pricing which is based on national averages. It should be understood by all parties that this is a benchmark, or a good starting point, but is not the final say in the actual cost of repairs.

Xactimate clarifies this in their own documents,

“Since Xactware’s published cost information is a reported market price based on recently acquired submissions, there is no way to be certain that any published price will be appropriate for a specific contractor, repair, or structure. Having cost information that is based on recently submitted prices, however, is an extremely valuable tool in creating appropriate repair estimates, providing a basis from which the estimator can then decide whether the price should be accepted or adjusted.”

Insurance Estimates For Repairing Your Home

While it is often recommended to acquire three estimates when performing a home improvement project, this can be counterproductive during an insurance claim. Often the best course of action is to work with a local contractor whom you feel is best suited to accomplish the scope of work necessary to restore your home. If the insurance company is requesting multiple bids, they should be responsible to provide the contractors and do so in an expedient manner. Otherwise, a proposal from your local contractor should be sufficient to achieve The Claims Standard, as described in How To Suck Less At Estimating,

“To restore your home to resemble pre-loss conditions with materials of like kind and quality; no more and no less.”

As a policyholder and a homeowner, this standard defines what you should expect from your chosen contractor and your insurance company. If the contractor and the adjuster disagree on elements of the scope or cost, they should be able to explain why it is, or is not, an essential element of “restoring your home to resemble pre-loss conditions with materials of like kind and quality.” The contractor should be able to support the scope that they are proposing and the adjuster should be able to cite specific portions of the policy when denying any elements of the scope.

Insurance Claims Estimating Process

An initial estimate should include an accurate scope, based upon observed damages, and initial cost (likely based upon standardized pricing). The initial estimate should be what is needed to get all parties on the same page with an agreement for ongoing dialogue on the additional scope or cost adjustments (common).

  • Thorough gathering of data from the affected structure (documentation)

  • Accurate representation of the scope of work in an estimate submitted to insurance

  • Agreement between all parties on the approved scope and initial cost

  • On-going conversations for an updated scope of work (discovery of additional damages) and/or updated cost (based upon real-world labor and materials)

Hiring A Local Insurance Repairs Contract

ARES Restoration is a licensed, bonded, and insured local contractor. “Helping you get your home back,” in Pierce County, Washington. Our team specializes in working with insurance companies to restore your home to resemble the conditions prior to the impact of water or fire-related damages. Read more about us in the ARES Blog or watch some of the videos we created to help local homeowners better understand the insurance claims process.

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