Insurance Work Estimating

You can make a decent buck on insurance work if you estimate in exacting detail. February 11, 2009

We put down some engineered flooring for a homeowner a few months back. Recently one of her laundry cabinets fell and broke a water line flooding the floor and ruining her flooring. The homeowner wants me to give an estimate to the cabinet company's insurance company to repair/replace damaged material.

I have never dealt with insurance claims and have heard bad experiences from other tradesmen - the major complaint being untimely payment. This was very expensive flooring that I don't want to float material cost for an extended time. I would love to hear others' experiences with insurance claims whether positive or negative.

Forum Responses
(Business and Management Forum)
From contributor K:
Give the estimate to the customer and let her deal with the insurance is what I do. The homeowner is responsible for the bill. The insurance is responsible to the home owner. My contract states that I get paid by the homeowner when the work is complete. If I have to wait for insurance payment and their red tape, I charge much extra to make it worthwhile. Normally when they hear that, they take my terms.

From contributor W
All insurance adjusters refer to a manual of allowable expenses. Most use software for this called Xactimate to calculate the allowable expense for the repairs. Xactimate is pretty good at getting a real world estimate together. The problem lies with how the contractor submits his bid. Let me explain.

Xactimate is task-based, which means it will account for everything from driving to the site, setting up tools, demolitioning the old and reinstalling the new. Problem is that most contractors aren't that detailed so they submit a bid that might say demo old floor: $1500.00, instead of saying remove shoe mold, remove flooring, remove underlayment, dispose of shoe mold, dispose of whatever - you get my drift.

So, when the adjustor sees your bid for demo flooring at $1500 and Xactimate only allows $800 for the actual demo, there is discrepancy and the adjustor tells the homeowner that they will have to fund the difference or talk the contractor down, when all that had to happen is for the contractor to detail and charge for every minute aspect of the job.

As for getting paid, adjusters aren't going to release funds until milestones are reached, period. Just ain't going to happen. But when a milestone is reached, they pay on the spot, or at least that has been my experience. I have had adjusters go to their car after inspecting work and write checks for $100 and checks for $50k. Just depends on your scope and whether or not the work was done in an acceptable manner.

Before I forget, (and I'm not trying to sell you anything), Xactimate is available for the contractor on a subscription basis if you intend to do a lot of insurance-related work. The money is good and cash flow is as frequent as you complete the jobs. But, you have to be detailed-oriented.

From contributor B:
I am a remodeler in Houston, TX and we have changed strategies since hurricane Ike and we are swamped which is a good thing. The problem is that some of the proposals that we have submitted to the first few clients are way off from the insurance adjusters amount. I know construction prices and have done many projects fairly and honestly.

What are the steps to get the amount to a reasonable agreement price with the adjuster? It almost seems like the insurance companies are trying to go ridiculously low and cut corners on these people. Any suggestions before I get really discouraged? Also, what is the impact on the timeliness of getting these people’s homes in livable condition if they do not know any better and accept the first money offered and then try and get their house fixed?

From contributor W:
I sent you a private e-mail too. The answer is not what you think, so please don't get discouraged. The adjustor is not intentionally low-balling the price. Instead, he is doing what any good company rep would do. He is making a fair offer based on the information that he has in front of him.

The problem is that he doesn't have all of the information he needs to make an accurate offer and he doesn't have the desire or inclination to get that information. Instead, that responsibility lies on the shoulders of the homeowner and the contractor. This is the reason why I suggest that any contractor wanting to perform insurance work become intimately familiar with software such as Xactimate. I suggest this software because this is the software that most insurance adjustors use.

There is a learning curve with this software, but once learned, it becomes a relatively simple process to create an estimate. Here’s the clincher.

In order to use Xactimate effectively, you must thoroughly understand and be intimately prepared with a reconstruction plan. You have to understand the damage presented and have a detailed plan to renovate the damage. I can't say this enough. If the renovation requires that you clean out debris, then that is an action step. If the renovation requires that you replace a window or door, then you must detail every step of the process from removing the trim to cutting the nails to pulling the window out of the opening and carrying the old window over and putting it into a trash bin. So on and so forth. If you do this, then you will find that the adjustor will be more amenable to matching your estimate. Likewise, if you are able to e-mail the Xactimate estimate to the adjustor, you just made his life easy and he will bend over backwards to make your life easy.

Now for the second part of your question - I understand what you are asking when you ask how long should it take a reasonable person to get back into their homes. You are not asking about the construction process because that depends on a lot of variables. Instead, I think that you are asking how long before you are paid.

It has been my experience that if you detail every aspect of the job as mentioned above, you can expect to be paid as each phase is completed. It has also been my experience that when you complete that phase, if you call the adjustor over to inspect that it has been done, (for example, clean up), they will cut you a check on the spot.

A lot of guys made a lot of money in New Orleans, just bidding clean up and demolition. A five man crew could demo and clean up two houses a day and collect a check of around $5,000 a day. It's all about the details.