How to Read an Insurance Scope of Loss (And Spot What Is Missing)
When your insurance adjuster finishes their inspection, they generate a document that drives everything that follows: the scope of loss. This document determines how much you get paid, what repairs are authorized, and whether the settlement covers the actual cost to restore your property. Most homeowners receive this document, file it away, and assume it is correct.
It usually is not complete. Over 1,000 claims handled in SE Michigan, we have found underpayments on the majority of adjuster-generated scopes we have reviewed. The gaps are not always intentional, but they are consistent. Knowing how to read this document is the first step to making sure your claim pays what your damage is worth.
What a Scope of Loss Actually Is
A scope of loss is a line-item estimate that describes the work required to restore a damaged property to its pre-loss condition. Most insurance carriers and adjusters generate scopes using a software platform called Xactimate, published by Verisk. Xactimate is the industry standard, and its line items, pricing database, and format are recognized by contractors, public adjusters, attorneys, and courts throughout the country.
The scope is not a repair bid. It is an insurance calculation. The adjuster builds it based on what they observed during their inspection, measured against Xactimate’s pricing database for the local market. When the scope is complete, the carrier uses it to calculate your claim payment.
The scope will typically show a gross replacement cost value (RCV), subtract depreciation, and arrive at an actual cash value (ACV) payment. If you have a replacement cost policy, you can recover the depreciation later after repairs are completed. Understanding both numbers matters.
How Xactimate Line Items Are Structured
Each line item in an Xactimate scope has the same basic structure: a trade category, a description of the work, a unit of measure, a quantity, a unit price, and a total. A few examples of what these look like in practice:
- RFG 240 — Remove and replace asphalt shingles (per square): This covers shingle tear-off and installation. One square equals 100 square feet of roof.
- DRY 520 — Drywall repair (per SF): This covers patching and finishing. It is typically separated from painting.
- FRM 200 — Framing labor and materials (per LF or SF): Structural framing repairs are measured and priced by linear or square foot depending on the component.
- DEM 100 — Demolition labor (per SF or LS): Demo is listed separately from installation and often carries its own line items for disposal.
Categories you will see repeatedly in a typical residential claim include demolition, framing, insulation, drywall, painting, roofing, windows, electrical, HVAC, and finish carpentry. Each category should be broken out, not bundled.
What Overhead and Profit (O&P) Is and Why It Matters
One of the most commonly omitted or disputed items on an insurance scope is overhead and profit, abbreviated O&P. This is a percentage markup applied to the total scope that accounts for the general contractor’s cost of doing business: project management, insurance, bonding, office overhead, and the contractor’s profit margin.
Xactimate has a standard calculation for O&P, and it applies when the job requires a general contractor to coordinate multiple subcontractors or trades. On fire damage jobs and large storm claims involving multiple systems, O&P is almost always warranted. On a simple single-trade repair, it may not be.
Adjusters routinely omit O&P, either because the carrier’s guidelines push back against it or because the adjuster did not flag the scope as requiring general contractor coordination. If your job involves more than one trade and you are hiring a licensed GC to manage the work, O&P belongs in the scope. Its absence is one of the first things we look for when reviewing a client’s adjuster estimate.
What Adjusters Commonly Leave Out
After reviewing hundreds of adjuster scopes across fire damage, hail and storm damage, and other claim types, these are the items we find missing most often:
Code Upgrade Requirements
Michigan building codes require that repairs be brought up to current code, not just restored to pre-loss condition. If your roof is being replaced, current code may require additional underlayment, ice and water shield, or ventilation that was not on the original roof. If structural framing is opened, the current energy code may require upgraded insulation. These code upgrades are covered under most policies via a Coverage E or ICOE endorsement, but adjusters routinely omit them because they require knowledge of current local code requirements. Your scope should include these items; if it does not, they need to be added through a supplement.
Debris Removal and Haul-Away
Tearing out damaged material costs labor. Hauling it to a disposal facility costs money. On fire and large storm claims, debris removal can represent several thousand dollars of legitimate scope that adjusters frequently undercount or omit entirely. The Xactimate database has specific line items for debris removal by weight, volume, and type — a well-built scope uses them.
Permit Fees
Most Michigan jurisdictions require permits for the type of work involved in an insurance claim repair. Roofing permits, structural permits, mechanical permits — these are hard costs that should appear in the scope. Their absence means either the adjuster expects you to absorb the cost or expects the work to be done without permits. Neither is acceptable. Unpermitted work can affect your ability to sell the property or make future claims.
Matching
If the damage requires replacing a portion of a continuous surface — siding, flooring, cabinetry, roofing — and the replacement materials do not match the existing undamaged materials, the carrier may owe for the entire surface. This is called the matching doctrine, and Michigan courts have addressed it in the context of property insurance. Adjusters routinely limit scope to only the damaged section. If matching is an issue on your claim, it needs to be documented and disputed.
Overhead and Profit
As covered above, O&P is frequently omitted. On any multi-trade job managed by a general contractor, its absence is a documented discrepancy that should be addressed in a supplement.
How to Compare the Scope to the Actual Damage
The best way to check an adjuster’s scope is to walk through the damaged areas with the scope in hand. For each section of the property, ask: is every damaged component listed? Is the quantity correct? Is the line item description accurate?
Adjusters work quickly and measure remotely where possible. On roofs, they frequently estimate square footage rather than measure precisely, and they may miss hidden damage that only becomes visible during tear-off. On fire claims, smoke and water penetration often extends well beyond the visible burn area, but the adjuster scope may cover only what was visibly charred.
Having a licensed contractor review the scope before you accept the settlement is the most reliable way to identify what is missing. This is a standard part of what we do for new clients at Phase III.
What a Supplement Is
A supplement is a formal request to add line items to an approved scope. It is not a reopened claim — it is an addendum to the existing claim. Supplementing is normal and legitimate. Most large claims are supplemented at least once, and many are supplemented multiple times as hidden damage is discovered during the repair process.
Supplements are submitted to the carrier with documentation: photos, measurements, a contractor’s written scope, and supporting Xactimate line items. The carrier assigns an adjuster to review the supplement and issue a revised scope and payment. Turn time varies by carrier and claim complexity, but typically runs two to four weeks.
If your contractor finds additional damage during demolition that was not in the original scope, that is a supplement. If your adjuster omitted O&P or code upgrades, that is a supplement. If the adjuster measured the roof short, that is a supplement. Supplements are not adversarial — they are part of how the claims process is designed to work.
What to Do With This Information
Read your scope. Check every section against the damage you can see. Look specifically for O&P, code upgrades, debris removal, permit fees, and matching. If something is missing, note it.
Then get a licensed contractor to review it before you sign anything or cash the check. Cashing the ACV check does not waive your rights to the recoverable depreciation or to supplement for missed items, but signing a release or signing off that repairs are complete can limit your options. Understand what you are signing.
Phase III reviews adjuster scopes for clients as part of our standard intake process. We have handled claims from Wayne, Oakland, Washtenaw, and Livingston counties for more than 30 years. Our review is not a sales pitch — it is a line-by-line comparison of what the adjuster included against what the damage actually requires. If the scope is correct, we will tell you that too. See our FAQ page for more on how the claims process works.
Get a Free Scope Review From Phase III
If you have an adjuster estimate and want to know whether it covers the actual damage, call us. Phase III Construction is a licensed Michigan GC (license #262000615), BBB A+ rated, and has recovered more than $10 million for SE Michigan homeowners. We know what complete scopes look like, and we know what is missing from incomplete ones.
Call (734) 237-7322 or start your claim review online. We serve Wayne, Oakland, Washtenaw, and Livingston counties.
Related: What Is Recoverable Depreciation and How Do You Collect It? — once you know what the scope should include, make sure you collect all withheld depreciation.