Why Is the Insurance Estimate Lower Than the Contractor’s Estimate?

Because a carrier’s first estimate is a starting figure, not a final one, and that is true almost everywhere rather than being something wrong with your claim. A homeowner is told a roof is $15,000 and the carrier’s paperwork says $12,000, and the natural conclusion is that the $3,000 is theirs to find. Usually it is not. Arrowhead Roofing has worked storm claims across Tulsa since 1987, and the gap between those two numbers is the most common thing we get asked about.

Note: this is a general explanation of how estimates and claims are reconciled. It is not a statement about any particular policy or claim. Arrowhead Roofing is not a licensed public adjuster and we do not negotiate insurance claims. What your policy covers is determined by your policy and your carrier.

Five ordinary reasons account for most of the gap, and none of them is anybody behaving badly.

The Short Answer

An insurance estimate and a contractor’s estimate are two different documents built for two different purposes, and they are not supposed to match on the first pass.

A carrier’s estimate prices the damage its adjuster recorded, using its own software and its own regional unit costs. A contractor’s estimate prices the work required to put the roof back, including everything found on the roof and everything the code requires.

Where those two descriptions differ, the number differs. The work after that is documenting the difference, and it has a name in this trade: reconciliation.

“Do I Have to Come Up With the Difference?”

This is the question, in the exact words homeowners use, and Andy Anderson at Arrowhead answers it better than we could rewrite it:

We’re willing to work for what the insurance company allows. However, the insurance company is always cheaper. Very seldom do I ever see an insurance company that paid more than what my estimate is on the front side. We normally have to go back to them and say, hey, we need more money.

A lot of homeowners are discouraged at first because they’re like, oh, you’re saying it’s $15,000, they’re telling me it’s $12,000. Do I have to come up with the difference? We explain to them, no, the insurance company will pay what the actual cost is.

That is his description of what we have watched happen across a great many jobs, not a promise about your policy. What any specific claim pays is determined by that policy and that carrier, and they are the only ones who can tell you. What we can tell you is that a first number coming in low is ordinary, and that going back with documentation is a normal part of the process rather than a sign that something has gone wrong.

Why Scope Beats Price Almost Every Time

Homeowners tend to focus on the unit prices in an estimate. The larger money is nearly always in what is listed, not in what each line costs.

An adjuster is on a roof for a limited time, working from what is visible on the day. Ridge cap, starter strip, drip edge, pipe boots, flashing at a chimney, ventilation, and the leak barrier the code requires in the valley are all items that can be missed by somebody moving quickly, and each one is real work with real material behind it.

That is why documentation is worth more than argument. A line item that is photographed, measured and tied to a requirement is a different proposition from a line item somebody says should be there.

The Things Nobody Can See Until the Roof Is Off

Some of the gap is not a disagreement at all. It is information that did not exist when the first estimate was written.

Soft or rotten decking is the classic case. It is invisible from the surface, it has to be replaced before anything goes back on, and it is found on the day the old roof comes off. So is a second layer nobody knew about, a plank deck with gaps too wide for the manufacturer’s instructions, and a chimney flashing that was wrong when it was installed thirty years ago.

The right way to handle those is to photograph them as found, before they are covered, and to record them against whatever requires them. That way the conversation afterwards is about a documented condition rather than a recollection.

What Changes the Answer

Three things affect how large the gap is and how it lands, and only the first is about the roof.

How complete the first inspection was

A thorough first pass, with every distinct area of damage recorded and annotated, produces a smaller gap and a shorter process. This is the part where being present with a contractor who documents properly makes a measurable difference.

Whether the policy carries ordinance or law coverage

Code required items are a real cost with a real requirement behind them, and whether that cost is covered is a separate coverage question from whether the code applies. Oklahoma has settled the second part and not the first.

Your deductible and your settlement basis

A percentage deductible, a flat deductible, and whether the claim settles at replacement cost or actual cash value all change what reaches you, without changing the estimate at all. Those are on your declarations page.

What We Do About It

There are two estimates on a claim job and it helps to know which is which. The one we hand you is a written estimate for the roof system your house needs: the product, the ventilation, the whole assembly, as one figure. The line by line version is the Xactimate, we build it once you engage us as your contractor, and it is the one that goes to the carrier.

You are welcome to a copy of the Xactimate and some homeowners want one. Others would rather hear from us when the job is done. Either is fine, and neither changes what we send the carrier.

Before any of that, we order an aerial measurement report and a weather report on the address, then we inspect and photograph and annotate each distinct area of damage. We meet adjusters on the roof. We do not negotiate claims, and we are not a licensed public adjuster.

If you have a question about what your policy covers, that belongs with your carrier or your agent, and after that with the Oklahoma Insurance Department’s consumer assistance line on 1-800-522-0071.

Related Questions

What about the money they held back until the work is done?

That is recoverable depreciation and it is a separate mechanism from the estimate gap, though the two get confused constantly. What is recoverable depreciation on a roof claim? covers the two check structure.

Does the carrier have to pay for code items the old roof never had?

Oklahoma’s regulator has instructed carriers to treat every building code as strictly enforced for ordinance or law purposes. Does insurance have to pay for building code upgrades on a roof in Oklahoma? covers the bulletin and the items it reaches.

Why do the two measurements of my roof disagree?

Aerial and field measurements of the same roof rarely match exactly, for ordinary reasons. How do you measure a roof for shingles? explains where the differences come from.

What are the overhead and profit lines everyone argues about?

A general contractor’s markup, customarily 10 percent and 10 percent, and it is a frequent part of the gap between two estimates. What are overhead and profit on an insurance claim? covers what the line pays for and why the three trade rule is not a rule.

See Also

The two answers on either side of this one are how storm damage gets documented in the first place, and what happens to the money held back until the job is finished.