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A RocketLevel guide, awareness-level, for restoration owners and estimators, backed by decades of experience in the trade. This explains how insurance pricing is assembled and where you actually have room to move.
A lot of restorers treat the carrier's number as a fixed quote: it comes back, it is what it is, and the only options are take it or fight it. That is the wrong mental model, and it costs margin. A restoration estimate is built from published, regional pricing, adjusted for real conditions, documented line by line. Once you understand how the number is assembled, you can see where it can move.
Most insurance estimates are written in estimating software (Xactimate from Verisk, or the old Symbility line that Cotality now sells as Claims Workspace and Estimate), and the prices come from a regional price list. That price list is researched and republished on a regular cycle, often monthly, for each metro or region, so it tracks local labor and material costs as they move. Two things follow from that. First, the same line item can be priced differently in two cities, because the underlying labor and material markets are different. Second, the price list you wrote against last quarter is not the one in effect today. When you read an estimate, the first question is which region and which price-list date it was built on, because that sets the baseline everything else sits on.
Each line item is a small, pre-built unit of work, and its price is not one number. It bundles the labor, the material, and the equipment for that task into a single unit rate. Remove a section of drywall, run a dehumidifier for a day, apply antimicrobial to a wall: each is a line item with a quantity, a unit, and a rate that already contains the labor minutes, the material cost, and the equipment cost the price researchers assigned to it. Understanding that a line item is a bundle, not a flat fee, is what lets you see when one of its components (usually labor or equipment in a tight market) no longer matches your real cost.
The price list is a regional average on a publish cycle, so it lags reality during disruptions. After a major storm, labor gets scarce and crews command a premium. A supply shock spikes the cost of a material the list still prices at last month's number. That gap is what a market conditions (MC) adjustment is for. It is a documented, justified change to a line item's price when your real, current cost is provably above the published rate because of conditions in your market. Used honestly, it is the mechanism the system provides for exactly the situation where a regional average can't keep up with a local spike, and it only holds up with documentation: a wage you actually paid, a supplier invoice, a labor-availability reality you can show.
The single habit that separates estimators who get approved from those who get cut is writing the justification into the estimate itself, not keeping it in their head. In the common estimating tools, line-item notes (often called the F9 note, after the key that opens them) let you attach a written explanation directly to a line: why the quantity is what it is, why an unusual condition exists, why a market-conditions adjustment was applied. An unexplained number is the easiest thing in the file to cut, and the note lets you defend your scope with a record instead of a phone call.
There is one more layer that sits on top of the line items: general contractor overhead and profit, the familiar ten and ten. Nobody publishes that number as a standard. Verisk leaves general O and P out of its unit prices and leaves the percentages to the estimator. Its own overhead and profit white paper states that "General overhead expenses aren't included in Verisk's unit pricing but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin," and that "the ultimate amount of overhead and profit, as well as how and where it's accounted for within the estimate, is left to the discretion of the estimator based on the conditions of the job and the service provider performing the work."
That is what makes ten and ten an estimating convention that hardened into a claims habit. It does not pay for the physical work; the line items do that. It compensates you for running the job as a general contractor, coordinating, scheduling, and supervising multiple trades, and carrying the risk of the whole project. On complex, multi-trade commercial reconstruction, and where general conditions apply on larger projects, that coordination is real and so is the entitlement. The full treatment, when O and P applies and how to document it, is in Overhead and Profit: When You're Entitled to It, and How to Justify It. Do not confuse it with general conditions, which are the project-wide costs of running the job and are priced as their own block. Those are covered in Commercial Estimating Best Practices.
Ten and ten is widely read as a 20% margin. The arithmetic says otherwise, and the 2025 Restoration Industry Association (RIA) Cost of Doing Business Report works it through on its printed pages 47 and 48. Start with $100 of cost. A 10% markup for overhead puts you at $110. A 10% markup for profit on top of that puts you at $121. Overhead and profit together come to $21. Divide $21 by the $121 you billed and the combined margin is about 17.4%. A markup is calculated on cost. A margin is calculated on revenue. Those two words get traded for each other constantly in claims conversations, and the swap costs the contractor money.
The second half of the report's argument is the one that should change how you read the model. That 10% overhead markup assumes your overhead runs at 10% of the job. Read directly at printed page 37 of the same report: average total overhead across the FY2024 respondents is 38.53%, up from about 36% the year before, and page 47 adds that most companies operate with total overhead typically between 27% and 38% of revenue. The report's own framing is that average total overhead is nearly four times what the model assumes. Pull your own overhead rate off your profit and loss statement (P&L) and hold it against the 10% built into the convention, because that gap is the size of the hole it leaves in a job.