How to Read an Insurance Claim Estimate

Learning how to read an insurance claim estimate is critical for homeowners, public adjusters and lawyers. Understanding what coverage exists can make a substantial impactful difference on a client’s case – not to mention on rates!

Insurance claim estimates contain a code to indicate which cost database (Xactimate) was used, so ask your adjuster what that code means as well as when and year it was generated.

Components of an Insurance Estimate

Insurance estimates serve to assess the potential losses of policyholders. They allow insurers to ensure they cover these costs while remaining profitable and financially stable, and are also an essential part of the claims process – it’s therefore essential that policyholders become familiar with its components so they can ensure their claim is being treated fairly.

An insurance estimate contains various components, such as scope of work, pricing and depreciation. It’s essential to pay close attention to exclusions as these may prevent repairs that are actually required from happening. Furthermore, understanding pricing methods used will impact the total amount of an estimate.

Many insurers and adjusters use Xactimate software to generate insurance claim estimates for homeowners. Although each insurer or adjuster may utilize the program differently, the basic per unit pricing remains similar across industries allowing an average homeowner to easily compare multiple estimates against one another and see if there are any notable discrepancies.

On the first page of an insurance estimate will typically be listed the name and contact information for both insurer and adjuster; as well as a brief summary of damages claimed. Subsequent pages typically contain sections for each type of coverage involved as well as a summary showing Replacement Cost Value (RCV) and Actual Cash Value (ACV) figures for every item listed in the estimate.

Note that ACV does not account for the deductible – an agreed upon sum policyholders must pay out-of-pocket. Furthermore, actual cash value (ACV) may differ from RCV depending on unforeseen factors affecting material and labor costs – inflation, shortage of labor or supply chain disruption can affect material and labor costs and repair services; insurance companies often increase premiums to cover rising repair and replacement costs.

Types of Damages

Most insurance companies use Xactimate software to generate loss estimates and property claims estimates, though depending on your adjuster and insurer it could range anywhere from four pages up to 100 pages long. No matter its length however there are some consistent components which make an estimate valid:

An insurance estimate should clearly identify all items damaged and their associated repair or replacement costs; this is known as the “scope of work.” Additionally, it’s essential to assess actual cash value (ACV) and depreciation; ACV represents what insurance will pay after depreciation while total coverage amount equals ACV minus your deductible amount.

Insurance estimates include two categories of damages: special and general. Special damages (also referred to as monetary damages) refers to tangible out-of-pocket expenses associated with an injury such as medical bills and lost wages, while general damages include non-tangible expenses like pain and suffering as well as the reduction in enjoyment of life.

Addition of economic damages may be relatively straightforward, while calculating intangible ones can be more complex. A jury might decide that someone experienced pain and suffering after an accident, so compensation might be awarded accordingly. There are two methods used by courts when calculating general damages: multiplier method and per diem method.

Punitive damages are awarded in cases of gross negligence or intentional misconduct which cause personal injuries to plaintiffs. Although punitive damages are typically not awarded when it comes to insurance claims, sometimes exceptions exist where punitive damages may be awarded in certain instances.


Many property policies contain sublimits that specify how much a policyholder can recover for certain losses. These sublimits typically form part of, rather than supplement, the overall policy limit; for instance, an aggregate limit of $2 million might include sublimits for flood, Named Storm and earthquake losses along with debris removal costs and preservation of property costs. Finding these limitations should be simple since they’re typically listed in a chart or list in your declarations section of your policy.

Sub-limits can also be found in health insurance policies, limiting coverage for costs such as room rent and treatment of specific diseases or conditions. If the patient’s total claim exceeds their sub-limit, any excess must be covered out-of-pocket.

Claim time can be the worst time to discover policy limitations, so policyholders should take time now to understand their coverages before disaster strikes. One great way of doing this is completing regular account reviews with their independent agents; these reviews enable them to explore all available coverages tailored specifically for them and discuss all available insurance solutions that fit within those needs.

Unfortunately, many homeowners are shocked to discover restrictions in their property insurance policies at claim time due to not discussing supplemental coverages with their agent prior to buying the policy. Insurance agents tend to focus more on using Internet raters or 1-800 numbers than taking time with clients about their risk exposures and creating proposals tailored specifically for each one.

Unsurprising to many homeowners is learning that their policy includes a stacking limitation. This restriction prevents them from adding the value of damaged items from more than one category (i.e. jewelry and fine arts) in order to receive higher payouts.

Personal property can present unique challenges when it comes to setting limits. Material and labor pricing shifts drastically every month, which can have a dramatic impact on repair costs. Policyholders should review their Xactimate estimates and adjusters’ notes regularly in order to receive maximum payout for losses they experience.


Deductibles are an essential element of any insurance policy. A policyholder’s out-of-pocket expenditure before an insurer starts paying on claims is known as their “deductible”, and typically listed on standard homeowners, condo owners, renters and auto policies’ declaration pages. Selecting your deductible depends upon several factors including financial situations and risk tolerance when making this choice.

A higher deductible may require greater out-of-pocket expenses in the event of a claim, but may lead to lower premiums every month or year. A low deductible often results in higher out-of-pocket expenses in such situations but may save money with your premium payments overall.

Insurance companies use a formula to assess the worth of property losses and decide on an acceptable settlement amount. This starts with an estimation of what they believe you might reasonably receive at trial; then subtracting out your deductible gives a net claim figure.

Insurance companies will take several factors into consideration when settling claims: impact to policyholder and repair cost are primary considerations; additionally they use market research data such as similar property sales prices as an indication of what you can expect in settlement payout.

After the field estimate has been conducted, all this information is compiled into an estimate and sent directly to the insured. Most companies utilize Xactimate software for these estimates, although each version may appear slightly different; separate spreadsheets for dwelling, other structures, contents and code upgrades total up to form RCV or Replacement Cost Value of your claim before subtracting out your deductible to determine Net Claim or Actual Cash Value that will then be sent from insurance company.