Dealing with insurance claims often feels like deciphering a complex puzzle, and one crucial aspect is understanding and obtaining overhead and profit (O&P). In insurance claims, overhead and profit encompass the necessary costs of running a business and the company’s financial gain from its operations. This guide aims to shed light on securing overhead and profit from insurance companies in a friendly and accessible manner.
How do I get overhead and profit from insurance?
When working on a construction project, there are extra costs called overhead and profit (O&P). This is money that contractors or project managers charge on top of the actual materials and labour costs. Usually, people follow a rule of thumb, which is 10% for overhead and 10% for profit, which is added to the direct costs.
Getting this O & P money from insurance claims can be tricky. Insurance companies might have differing views on paying for it, bringing up things like the project’s complexity or the type of work involved.
Here are some friendly tips to help you get that O&P money from your insurance:
Be the Right Kind of Contractor:
Ensure you’re a licensed general contractor or construction manager, not just a specific type like a roofer. This helps overcome arguments that say, “Roofers don’t count.” It shows you’re qualified for all sorts of projects.
Protect Yourself with a Contract:
Before any work begins, ensure a signed contract is in place with the client. This contract should clearly outline the following:
- Scope of work: This details the specific tasks involved in the project.
- Price: Clearly state the agreed-upon cost for the entire project.
- Payment terms: Specify the payment schedule, including milestones and the final due date.
Emphasize Transparency Through Documentation:
Maintain a meticulous record of everything related to the job, including:
- Detailed log: Keep a daily log recording the date, time, and a comprehensive description of the work completed. This log is crucial to substantiate the job’s complexity and justify your overhead and profit charges.
- Customer relationship management (CRM) system: Utilize a CRM system to manage and track leads, clients, and projects efficiently.
Negotiation with Evidence:
When negotiating with the insurance company, be prepared to present thorough documentation to support your overhead and profit charges. This documentation can include:
- Invoices: receipts from subcontractors involved in the project.
- Material receipts: proof of purchasing materials used in the project.
- Labour logs: detailed records of the time and labour invested by your team.
Leverage technology for added security:
Consider installing security cameras at the worksite to:
- Deter theft and vandalism: The presence of cameras can discourage potential misconduct.
- Provide evidence in disputes: Video footage can serve as valuable evidence during disagreements with the insurance company.
Contingency Planning Through Contracts:
Before any work commences, ensure the contract is contingent upon the insurance claim’s approval. This safeguard protects you from financial burdens if the claim is denied.
Talk Clearly with the Insurance People:
When dealing with the insurance folks, be clear and professional about why you need the O&P money. Avoid using confusing terms and instead use specific numbers, like percentages and amounts. Be ready to negotiate and back up your O&P claims with evidence.
Bring in Some Help if Needed:
If the insurance company is not playing nice, consider getting a public adjuster or an attorney involved. They’re like your advocates and can help you fight for your O&P rights. They might even step in if things get tough and a dispute or lawsuit is on the horizon.
Knowing When to Walk Away:
Feel free to leave the job if the insurance company is unreasonable or unwilling to approve your justified overhead and profit charges. Remember, other contractors who are more likely to value your expertise and agree to fair compensation are available.
By following these steps and incorporating the valuable advices, you can significantly increase your chances of securing the rightful compensation for your overhead and profit in insurance claims. Remember, thorough documentation, clear communication, and a well-defined contract are your key allies in navigating the complexities of insurance claim negotiations.
Why insurance companies may dispute O&P
Some common reasons why insurance companies may dispute O&P are:
- Not Enough Different Jobs: Insurance companies might not agree to cover overhead and profit (O&P) if a construction project doesn’t involve at least three types of work, like roofing, plumbing, or electrical. They figure that more straightforward projects don’t need as much management or coordination.
- Project Not Tricky Enough: Sometimes, insurance companies say no to O&P if they think the project needs to be bigger or more complex. They look at the size, how long it will take, and how tough it is. They might skip covering overhead and profit if it seems like a minor deal.
- Not the Right Kind of Contractor: If the person in charge of the project is a roofer or a specialist instead of a general contractor or construction manager, the insurance company might say O&P is optional. They argue that roofers and others don’t do the same job as general contractors, so they don’t qualify for the extra coverage.
In simple terms, insurance companies want to make sure they’re paying for extra costs like managing and coordinating when necessary for the project’s size and complexity. If the project is straightforward or led by a specialist, they might skip the overhead and profit coverage.
Conclusion: how to get overhead and profit from insurance
Securing overhead and profit from insurance companies might seem daunting. Still, armed with a clear understanding of these concepts and the intricacies involved, policyholders can confidently advocate for their rights and ensure fair compensation. Being proactive, staying informed, and seeking professional advice when necessary are crucial steps in navigating the complexities of overhead and profit claims. In the friendly pursuit of fair compensation, policyholders can pave the way for smoother insurance claim resolutions.