How to Read the Estimate Your Insurance Company Sent You

Your insurance company sent you a stack of pages covered in line items, codes, and numbers. It looks official. It looks final. It is neither. This is their opening offer disguised as a technical document. Understanding what it says, and what it leaves out, is the first step toward getting paid fairly.

Most insurance estimates are written in a software program called Xactimate. This guide explains how to read one even if you have never seen one before. For a deeper dive into the software itself, see our detailed Xactimate reading guide.

The Basic Structure of an Insurance Estimate

A typical insurance estimate contains several sections:

• Cover page: Your claim number, date of loss, adjuster name, and policy information.
• Line items: The actual list of repairs, organized by room or area. Each line includes a description, quantity, unit price, and total.
• Summary page: Totals for each category (roofing, drywall, flooring, etc.) plus overhead, profit, and tax calculations.
• Depreciation schedule: A separate page showing how much they subtracted from each item for age and wear.

Understanding Line Items

Each line item represents one task or material. Here is how to read one:

Example:“Remove & replace drywall, 1/2" — 4x8, hung, taped, floated, ready for paint — 128 SF @ $2.87/SF = $367.36”

• Description: What work is being done (remove and replace drywall)
• Specification: Material details (1/2 inch, 4x8 sheets)
• Scope: What is included (hung, taped, floated, ready for paint)
• Quantity: How much (128 square feet)
• Unit price: Cost per unit ($2.87 per square foot)
• Total: Quantity times unit price ($367.36)

The unit price in Xactimate comes from a database that is updated monthly based on regional labor and material costs. For more on how this pricing works, see our Xactimate overview.

What Is Usually Missing

Insurance estimates are notorious for omitting legitimate repair items. Look for these common gaps:

• Matching: If they replace 20% of your flooring, the new material may not match the remaining 80%. Your policy likely requires a reasonable match. If matching is impossible, the entire floor should be replaced.
• Code upgrades: Building codes change. If your 1985 electrical panel is damaged, the replacement must meet 2026 code. The additional cost is covered if you have ordinance or law coverage.
• Tearout/setup:You cannot paint a ceiling without moving furniture, covering floors, and masking trim. These “setup” items are often excluded.
• Texture matching: If your walls have a hand-applied texture (knockdown, orange peel, skip trowel), matching that texture costs more than smooth drywall. Many estimates default to the cheapest finish.
• General contractor overhead and profit: When three or more trades are required, a general contractor is necessary to coordinate the work. Their standard markup (typically 10% overhead + 10% profit) belongs in the estimate.
• Permit costs: Many repairs require building permits. The permit fees and associated inspection time should be in the estimate.
• Related damage: Removing a water-damaged cabinet means disconnecting plumbing. That plumber cost should appear in the estimate.

Overhead and Profit (O&P)

This is one of the most commonly disputed items. When a general contractor manages your repair project, they charge overhead (their business costs) and profit (their compensation for managing the job). The industry standard is 10% for each, totaling 20% on top of the repair costs.

Many insurance estimates exclude O&P entirely or include it at a reduced rate. If your repair requires multiple trades (roofer, plumber, electrician, drywall, painter), a general contractor is needed to coordinate. O&P belongs in your estimate. See our overhead and profit guide for the full explanation of when and why it applies.

The Depreciation Schedule

If your policy pays actual cash value (ACV) initially with replacement cost value (RCV) recoverable later, the estimate includes a depreciation schedule. This document shows how much the insurer subtracted from each item based on age and condition.

Things to check on the depreciation schedule:

• Are they depreciating labor? In California, labor cannot be depreciated. The cost to install a new roof shingle is the same whether the shingle is 1 year old or 20 years old. Only materials should be depreciated. If you see labor depreciated, challenge it.
• Are the useful life estimates reasonable? An insurer might claim a 15-year-old roof has zero remaining life. But if that roof had a 30-year warranty, it had 15 years of useful life remaining.
• Is the condition assessment accurate? Depreciation should reflect actual condition, not just age. A well-maintained 20-year-old kitchen is worth more than the formula suggests.

For a full explanation of how ACV and RCV work, see our ACV vs. RCV guide.

Comparing the Estimate to Contractor Bids

Get at least one contractor bid for the same scope of work. When you compare them:

• Is the scope the same? The contractor might include items the insurance estimate omitted. That is a scope dispute you can raise with the insurer.
• Are the quantities the same? If the insurer says 128 SF of drywall and your contractor measures 200 SF, someone is wrong. Usually it is the adjuster who undermeasured.
• Are the prices realistic? Xactimate prices are market averages. In high-cost areas or after catastrophe events, actual contractor pricing may exceed Xactimate. That does not mean the contractor is overcharging. It means the database is behind the market.

Red Flags on Insurance Estimates

Watch for these indicators that the estimate was written to minimize payment:

• “Repair” where replacement is clearly needed
• Minimum charges on items that should have larger quantities
• Missing rooms or areas you know are damaged
• No line items for moving contents, protecting finishes, or cleanup
• Generic descriptions instead of specific materials (e.g., “carpet” instead of “nylon carpet, 40 oz, commercial grade”)
• Suspiciously round numbers in the quantities
• No O&P on a multi-trade repair
• Labor depreciation (illegal in California)

What to Do When the Estimate Is Too Low

An inadequate estimate is not the final word. You have options:

1. Get a contractor estimate for the full scope of repairs needed.
2. Submit a supplementidentifying the missing items and inadequate pricing, with your contractor’s bid as support.
3. Negotiate specific line items with documentation (see our negotiation guide).
4. Invoke appraisal if negotiations stall. This is a binding process where independent appraisers determine the loss amount (see our appraisal guide).

The estimate your insurance company sends is a starting point for negotiation, not a final determination of what your damage is worth. Treat it as such. Review it carefully, identify what is missing, and push back with evidence. The policyholders who get paid fairly are the ones who question the first offer.