Sunday, December 21, 2008

Property Claims: Overhead And Profit Disputes in Property Claims

If you do not know how to handle overhead and profit (OHP) issues in your insurance claim settlement, you could lose tens of thousands of dollars that you are entitled to collect.

Yet, many policyholders find themselves forced to use savings or borrowed money to complete repairs. It should almost never be so.

In any property or insurance claim, if you have to come out of pocket more than your deductible for repairs or replacement, your claim has not been handled correctly.

There have been disagreements over how to handle overhead and profit between insurance companies for years. I have handled claims for insurers who mandated that OHP must be removed on all repair estimates. Some insurers will pay OHP, but limit it to 10% overhead and 10% profit. Some pay OHP, but will only pay it when the policyholder provides a signed contractor repair contract.

But you should know that OHP is a legitimate expense of repair in a property loss, and your insurance company should not dispute OHP. Contractors have to manage sub-contractors, get building permits, pay their labor, materials and the rent, and get the work done while earning a profit.

Traditionally, in a homeowners, renters or business policy, insurance companies will consider OHP when there are three or more building trades involved in the repairs. For example, when there are carpenters, electricians and plumbers doing repairs, OHP is paid. However, if you only had a painter and a wallpaper hanger, most insurers would not pay OHP costs.

But consider how much this could affect your claim. If you had a fire claim with a $50,000 repair estimate with a general contractor handling the loss, 10% overhead is $5,000 and 10% profit is another $5,000. Together, that’s $10,000 more money owed to you.

So, if you submit your repair estimate and it has OHP built into it, make sure that the insurance company pays the OHP. It could be the difference between getting all your repairs paid for, and you having to pay some repairs yourself.

If you have experienced a property loss, whether fire, wind, flood or other, you need to know winning insurance claim strategies. The insurance company will not tell you the claims process, but I will. I will show you how to take control of your insurance claim, and add hundreds or even thousands more dollars to your claim settlement. For more information, go to the website listed here.

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