To Supplement, or Not To Supplement, That Is The Question

Is it Better to Supplement a Repair Estimate as You go or to Include "Worst Case Scenario" Costs?

It's a common question that restoration companies and estimators face: Is it better to create one repair estimate and stick to it, or to start low and add supplemental items as needed?

If you've been in the industry for a while, you might remember a time when insurance adjusters would criticize restoration companies for asking for additional money on projects. As a result, estimators began creating "worst case scenario" estimates to avoid this issue. They would include the cost of repairs that might not be necessary but were likely to come up, such as replacing a granite countertop because they often break during detachment.

The Shift to "As-Incurred or As-Needed"

Over the last decade, insurance companies have shifted their approach, moving toward an “as-incurred or as-needed” model. From the insurance company's perspective, they were tired of paying for work that wasn't actually necessary. From the contractor's perspective, it's difficult to accurately estimate costs for every project detail upfront. For example, it’s nearly impossible to know exactly how many supervisory hours will be needed for a specific claim. Even with a formula for estimating supervisory hours based on the total project cost, it's still just a ballpark figure, not an exact value for each job. We all know that some customers require more handholding than others.

Supplementing: Why It's Better for Everyone

To ensure a smoother claims process, it's best to align with the insurance company's newer approach. This means they only want to authorize work that is clearly required, not work that "may be necessary."

Here's how to navigate this process effectively:

• Set Expectations Early. In your initial estimate, make it clear that the values are for getting started and that you'll reach out with supplements if unexpected issues arise. In the estimate, you can zero out values for things you can’t know the cost of upfront, like supervisory hours, and add a note explaining that a supplement will be coming later for these items.

• Handle Communication with Care. Be mindful of your phrasing, especially in emails and text messages. Use language that shows you understand the process. For example, when an adjuster says a claim is closed, you can acknowledge this but also remind them they can reopen it until they have a signed completion document signed by the policyholder.

• Don't Call the Field Adjuster. For supplemental work, don't contact the field adjuster assigned to the project. Instead, reach out directly to their desk examiner.

• Document Everything. Be prepared with comprehensive documentation for any supplement, including photos, invoices from vendors, and building department records. If the insurance company needs to verify the additional work, they will choose to pay to send the field adjuster back out for a reinspection.

You should contact the insurance company as soon as it's no longer practical to continue the project without additional approval. This could be because the building department is requiring all of the windows to be replaced for emergency egress, a countertop broke during detachment, or you're at the end of the project and have accurate numbers for things like contents storage, furniture move-back labor, and true supervisory hours.

This complex game has ever-changing rules. Learn them, and you can stack the deck in your favor.