The terms 30 and growing
O&P (Overhead and Profit)
Overhead and profit, or O&P, is the markup a general contractor adds to a repair estimate, typically 10 percent for overhead and 10 percent for profit on top of line-item costs. Carriers often apply an informal three-trades test before paying it, but that rule isn't written into most policies. If your rebuild coordinates multiple trades, scheduling, and supervision, you've earned it. Waiving O&P to keep an adjuster happy is one of the quietest margin leaks on a restoration P&L, so bill it, justify it, and document the coordination that supports it.
TPA (Third-Party Administrator)
A third-party administrator, or TPA, is a company a carrier hires to manage claims and run its contractor network, handling assignments, scorecards, and program compliance between you and the insurer. Program work brings steady volume, but it usually comes with a fee off the top, capped pricing inside Xactimate, response-time requirements, and a scorecard that decides whether you keep getting assignments. Know your fully loaded cost per job before you sign, because TPA volume at a loss is just organized busywork that drains cash.
AOB (Assignment of Benefits)
An assignment of benefits, or AOB, is a signed agreement transferring the policyholder's insurance claim rights to the contractor, so you can bill the carrier and pursue payment directly. Florida gutted AOB with reforms in 2019 and 2022 after years of litigation-abuse claims, and other states restrict it too, so check your state before building a collections model on it. Where AOB is off the table, a direction-to-pay form still routes the check to you without transferring claim rights, and that distinction decides what you can do when the carrier shorts the invoice.
Xactimate
Xactimate is the Verisk-owned estimating platform most carriers, TPAs, and restoration contractors use to price property claims, built on regional price lists updated monthly. It's the shared language of the claim, but it's a reference, not a contract: the price list lags real labor and material costs, and nothing stops you from pricing line items to your actual numbers if you can support them. Learn to write it well. A clean, well-documented Xactimate estimate is the difference between a fast approval and a supplement fight.
Supplement
A supplement is a request for additional payment on a claim that's already been approved, filed when you find damage or scope the original estimate missed. Hidden damage behind drywall, code-required upgrades, and category changes are the usual triggers. Supplements are normal, but they're also where cycle time and cash flow go to die: photograph the condition the day you find it, notify the adjuster in writing before you proceed, and price it while the job is open. A shop that supplements cleanly gets paid. One that surprises the carrier at invoice time waits months.
Category 1/2/3 Water
Category 1, 2, and 3 water is the IICRC S500 scale for contamination: Cat 1 is clean water from a source like a supply line, Cat 2 carries significant contamination, and Cat 3 is grossly contaminated water such as sewage or rising floodwater. Category drives everything downstream: PPE, containment, what you dry versus what you remove, disposal, and price. Time degrades it too. Cat 1 left sitting can become Cat 2 or 3, so document conditions at arrival, because the category you can prove is the category you get paid for.
Class 1-4 Drying
Class 1 through 4 drying is the IICRC S500 scale for how much evaporation a water loss demands: Class 1 is the lightest load, Classes 2 and 3 step up the volume of wet, porous material, and Class 4 covers bound water in materials like hardwood, plaster, and concrete. Class sets your equipment counts and drying days, which set the mitigation invoice. Get it wrong in either direction and you pay: under-equip and you're buying a mold problem, over-equip without justification and the adjuster cuts your dehumidifier line.
Appraisal Clause
The appraisal clause is a standard policy provision that lets either party demand a binding process to resolve a dispute over the amount of a covered loss: each side hires an appraiser, the two pick an umpire, and any two of the three set the number. It's the fastest, cheapest way to settle a scope fight without litigation. Watch the current carrier move, though: reframing an amount dispute as a causation dispute, calling the damage wear and tear, lets them refuse appraisal entirely. Documenting cause on day one protects the remedy.
RCV vs ACV
Replacement cost value (RCV) is the cost to replace damaged property at today's prices, while actual cash value (ACV) is RCV minus depreciation. Most carriers pay ACV up front and hold the recoverable depreciation until repairs are complete and documented, which creates the cash-flow gap you end up financing on every rebuild. Watch for ACV-only endorsements, especially on roofs. If the policy never pays the holdback, your customer's budget and your final check are both smaller than the estimate suggests, so confirm the policy type before you schedule the build-back.
Managed Repair Program
A managed repair program is a carrier arrangement that steers policyholders into the insurer's contractor network, with scope, pricing, and warranty terms set by the carrier or its TPA. For the operator it's guaranteed flow at controlled margin; the carrier gets cost certainty and you get the scorecard. Two things to remember: in most states the homeowner keeps the legal right to hire whoever they want, and program pricing is a floor fight, so run the per-claim math every quarter and be willing to walk from a program that's underwater.
FAIR Plan
A FAIR plan is a state-created insurer of last resort that writes basic property coverage for homes and businesses the private market won't insure. As carriers pull out of wildfire and hurricane markets, FAIR plan policy counts have climbed fast and rates are following; California's plan took a 35.8 percent increase in 2026. For you that means more customers with thin limits, more underinsured losses, and harder conversations at contract signing, so verify coverage limits before you scope the rebuild, not after demo.
NFIP (National Flood Insurance Program)
The National Flood Insurance Program (NFIP) is the FEMA-run program that covers flood damage, the peril standard homeowners policies exclude. Residential limits cap at $250,000 for the building and $100,000 for contents, with no additional living expense coverage, so serious flood losses are underinsured by design. Flood claims also run on federal rules, including a strict 60-day proof-of-loss deadline. The program's current authorization expires September 30, 2026, and a lapse would stall closings and new policies right in the middle of hurricane season.
IICRC
The IICRC, the Institute of Inspection, Cleaning and Restoration Certification, is the nonprofit body that certifies restoration technicians and publishes the ANSI-accredited standards the industry works to. Certs like WRT, ASD, and AMRT are what carriers and TPAs check before handing out assignments, and the standards, S500 for water and S520 for mold, are what both sides cite in a scope dispute. Keeping certs current isn't a wall-plaque exercise. It's the credential that backs your invoice when an adjuster questions your procedure.
S500
ANSI/IICRC S500 is the Standard for Professional Water Damage Restoration, the document that defines water categories, drying classes, and accepted procedure on water losses. It's not law, but it functions as the standard of care: when an adjuster challenges your equipment counts, demo scope, or drying time, S500 is what you point at. It cuts both ways, though. Deviate from it without documented justification and the carrier's expert will use it against you, so when field conditions demand a different approach, write down why before you take it.
S520
ANSI/IICRC S520 is the Standard for Professional Mold Remediation, covering Conditions 1 through 3, containment, and the procedures for returning a structure to normal fungal ecology. Unlike a building code, S520 sets no numeric clearance threshold; success is defined as getting back to Condition 1, which is why third-party post-remediation verification matters. States are now layering law on top of it: Connecticut's mold licensing mandate takes effect October 1, 2026, and more states are watching. If mold is on your license, S520 competence is the floor, not the ceiling.
Public Adjuster
A public adjuster is a state-licensed adjuster who represents the policyholder rather than the carrier, typically for a percentage fee that most states cap. On a stalled or lowballed claim, a good PA can move numbers you can't. The line that matters for you: negotiating coverage or claim value without a PA or attorney license is unauthorized public adjusting in most states, and it can void your contract and put your contractor license at risk. Scope, document, and estimate all you want. Leave the negotiating to the licensed pros.
Subrogation
Subrogation is the carrier's right to recover what it paid on a claim from whoever caused the loss, like the manufacturer of a failed supply line or the plumber who botched the install. Your job is to protect the evidence: photograph the failure point in place, bag the failed part, and never haul the water heater to the dump. It runs the other way too. If your demo or drying causes damage, a subro demand can land on your desk, which is one more reason documentation and a solid GL policy are non-negotiable.
First Notice of Loss (FNOL)
First notice of loss (FNOL) is the policyholder's initial report of a claim to the carrier, and it starts the clock on everything that follows. Courts enforce prompt-notice clauses hard: a 2026 Florida federal ruling barred an entire claim after a six-week reporting delay and repairs done before notice. That makes sequencing part of your job on emergency work. Confirm the claim is reported before the saw comes out, shoot photos before demo, and get carrier acknowledgment in writing. Fast mitigation without notice discipline can cost the whole claim, and your invoice with it.
Matching Statute
A matching statute is a state law or regulation requiring carriers to pay for replacing undamaged materials when repairs can't reasonably match, so a continuous floor, a roof slope, or a siding elevation gets treated as a unit. Rules vary wildly by state, and some states have no matching requirement at all. Where one applies, it can double the scope on flooring, roofing, and siding claims, so learn your state's exact rule and cite it in the estimate instead of hoping the adjuster volunteers it.
Per-Claim Economics
Per-claim economics is the unit-level math on a single job: average revenue, gross margin, cycle time from FNOL to final payment, and the cash you carry in between. Industry claim volume is down and complexity is up, which means growth now comes from better per-claim math, not more claims. Track margin and collection lag by payer type. A program job with a fee off the top and 90-day pay is a different business than a retail water loss collected in two weeks, and your P&L should know the difference.
Appraisal Demand
An appraisal demand is the written notice that invokes the policy's appraisal clause and forces a disputed loss amount into the appraiser-and-umpire process instead of a lawsuit. The demand comes from the policyholder or the carrier, in writing, citing the clause. You don't send it as the contractor, but your file is what makes it stick. Watch the current carrier dodge: reframing an amount dispute as a causation dispute, calling the damage wear and tear, so appraisal never applies. Documentation that proves cause on day one is what keeps the demand alive.
Invoking a Matching Statute
You invoke a matching statute by citing the exact state rule in the estimate itself, with a note on the affected line items explaining why undamaged materials can't reasonably match the repair. Name the statute or bulletin number, attach photos showing the continuous surface, and put the full replacement scope in the original estimate instead of saving it for the supplement fight. If the adjuster refuses, ask for the policy language behind the refusal in writing. Rules vary a lot by state and some states have none, so check current state rules before you cite one.
Prompt-Pay Statute
A prompt-pay statute is a state law that puts deadlines on how fast a carrier must acknowledge, decide, and pay a claim, with interest or penalties when it blows the clock. Deadlines vary by state, so check current state rules before you quote one to an adjuster. Your job is the paper trail: log the date every document went in and every response came back, because the statute only bites when the timeline is provable. And watch the reform wave, since the same packages trimming AOB rights are being used to argue for prompt-pay rollbacks.
Recoverable Depreciation Release
A recoverable depreciation release is the carrier's payment of the holdback between actual cash value and replacement cost, issued once repairs are complete and documented. It's usually the last check on the job and the one most likely to stall, which makes it a cash-flow item, not an accounting footnote. Know what the policy requires to trigger it, typically a completion certificate, final invoice, and photos, and submit the package the day the job closes. Policies also put time limits on claiming the holdback, so calendar that deadline at contract signing, not at punch-out.
Direction to Pay
A direction to pay is a signed authorization from the policyholder telling the carrier to include the contractor on the claim payment, without transferring any claim rights. That distinction is the whole point: an AOB moves the rights, a direction to pay only routes the money. In states that gutted AOB, and Florida barred new ones starting in 2023, the direction to pay is the collections tool still standing. It won't give you standing to negotiate or sue in your own name, so pair it with a clear contract and payment terms the homeowner signed.
Scope Sheet
A scope sheet is the room-by-room field document recording every damaged material, measurement, and required task, written on site before anyone opens the estimating software. The estimate is only as good as the scope sheet under it: line items without field notes and photos behind them are the first things an adjuster cuts. Standardize the format, tie each photo to a line, and have the tech who actually saw the loss fill it out. The gap between your scope sheet and the adjuster's scope is where every supplement and appraisal fight starts.
Line-Item Pricing vs Unit Cost
Line-item pricing builds an estimate task by task from a published price list, while unit-cost pricing bids a lump figure per square foot or per unit of work. Insurance restoration runs on line items through Xactimate, and that structure is your friend in a dispute because every dollar traces to a task you can defend. Unit cost rules new construction and big commercial bids, which is exactly why carriers applying new-construction settings to restoration estimates is a pricing fight, not a technicality. Know both models, and know which one the job in front of you should be priced under.
Mitigation of Damages Duty
The mitigation of damages duty is the policyholder's obligation to take reasonable steps to stop further damage after a loss, and it's the legal reason emergency work starts before the claim is approved. It cuts both ways: a carrier can refuse to pay for damage the owner let get worse, and it can also punish work done in the wrong order. A 2026 Florida federal ruling barred an entire claim where repairs were done before the loss was reported. So mitigate, don't rebuild, confirm the claim is reported before demo, and photograph everything first.
Proof of Loss
A proof of loss is the sworn, signed statement of the claim amount and supporting facts the policyholder submits to the carrier, usually on the carrier's form and on a deadline. Miss the deadline and the claim can die regardless of merits: NFIP flood claims enforce a strict 60-day proof-of-loss rule, and private policies commonly set their own clock once the carrier requests one. Your estimate and documentation feed the numbers, but it's the policyholder's document to swear to, so flag the deadline early and get your final figures to them in time.
Examination Under Oath (EUO)
An examination under oath, or EUO, is a formal recorded interview the policy lets the carrier demand of the policyholder, taken under oath with a court reporter before the claim gets decided. Refusing to sit for one is a policy breach that can void coverage, which is why the demand alone changes a claim's temperature. Carriers use EUOs to lock in testimony and probe for fraud, and your job file often becomes the exhibits. If a claim you're working heads to an EUO, the policyholder needs a lawyer, and your contribution is a clean, consistent, dated file.