How to Challenge an Xactimate Estimate: A Step-by-Step Guide

You just received the insurance company's estimate for your fire-damaged kitchen. The adjuster was polite, spent forty-five minutes in your home, and told you the company would "take care of everything." Two weeks later, an envelope arrives. Inside is a dense, multi-page document full of codes, line items, and numbers that might as well be written in another language. The bottom line says $38,000. Your contractor says the job is $67,000. The gap between those two numbers is not a rounding error — it is the difference between a proper repair and a half-finished project that leaves your family in a home that was never fully restored.

That estimate was almost certainly produced using Xactimate, a software platform made by Verisk (formerly Xactware Solutions). And while there is nothing inherently wrong with Xactimate as a tool, the way it is used — and misused — by insurance carriers has turned it into one of the most effective mechanisms for systematically underpaying property insurance claims in the United States.

This guide will walk you through what Xactimate actually is, what it is not, and how to identify and challenge the errors that may be costing you tens of thousands of dollars.

What Xactimate Is — and What It Is Not

Xactimate is estimating software. It is a program that allows a user to input measurements, select materials, choose labor categories, and generate a cost estimate for construction and repair work. It is used by insurance carriers, independent adjusters, Public Adjusters, contractors, and restoration companies across the country.

What Xactimate is notis an oracle. It does not independently determine the cost of your repair. It does not assess damage. It does not interpret your insurance policy. It does not decide what is owed. Every single number on an Xactimate estimate is the product of choices made by the person who created it — the adjuster, the desk reviewer, or the estimator sitting in a cubicle who may never have set foot on your property.

The adjuster chose the measurements. The adjuster chose the line items. The adjuster chose the labor efficiency setting. The adjuster chose whether to include overhead and profit. The adjuster chose the material specifications. Every one of those choices directly affects the bottom line, and every one of them can be wrong.

Xactimate operates on a simple principle that applies to all software: the output is only as reliable as the input. If the adjuster measured your roof at 22 squares when it is actually 28 squares, Xactimate will faithfully generate an estimate that is short by six squares of roofing. If the adjuster selected "builder-grade laminate" when your kitchen had custom tile, Xactimate will price builder-grade laminate. The software does not know the difference. It does what it is told.

Nothing in a standard homeowners insurance policy — whether it is an HO-3, HO-5, or any other form — references Xactimate or authorizes an insurer to limit its obligations to whatever figure a third-party software program generates. The policy is the contract. The policy defines what is covered, how losses are valued, and what the insurer owes. As one commentator put it plainly: "Xactimate is not the law."

The Xactimate EULA: An Admission Most Adjusters Have Never Read

One of the strongest tools available when challenging an Xactimate estimate is the very document that governs the use of the software itself: the End User License Agreement (EULA).

The Xactware EULA, published by Verisk at verisk.com/privacy-policies/xactware-eula, contains language that directly undermines the way carriers present their Xactimate estimates as authoritative statements of repair cost.

Section 12.3 of the EULA states plainly: "We do not warrant the accuracy of pricing information in the Price Data."

Read that again. The company that makes Xactimate — the company that maintains the pricing database — does not guarantee that its prices are accurate.

The EULA further clarifies that Xactimate pricing is "intended to represent historical information and should be used as a baseline or place to begin creation of an estimate." In other words, Verisk itself describes its prices as a starting point, not a final answer. The EULA also acknowledges that local market conditions may vary from the prices contained in the database.

Common Errors to Look For

When you receive a carrier's Xactimate estimate, treat it like opposing counsel's brief: read it carefully, assume nothing, and check everything. Below are the most common categories of errors.

1. Wrong Labor Efficiency Settings

This is one of the most consequential — and least understood — errors in carrier estimates. Xactimate allows the estimator to select different labor efficiency settings that dramatically affect pricing across every labor line item in the estimate.

The key settings include:

• Restoration/Service/Remodel: This setting reflects the reality of repair work — jobs that involve drive time, mobilization costs, material delivery to an occupied structure, reduced productivity due to working around existing finishes and contents, and the inherent inefficiency of restoration and remodeling work. This is the appropriate setting for most insurance repair claims.
• Large Restoration/Remodel: A newer setting introduced by Verisk, positioned between the standard Restoration/Remodel and Total Rebuild settings. This setting reduces labor pricing by approximately 5-10% compared to the standard Restoration/Remodel setting.
• Total Rebuild or Similar: This setting reflects new construction efficiency — large-scale work on unoccupied structures where crews have unrestricted access. This setting produces the lowest labor costs.

Here is the problem: when a carrier's adjuster selects "Total Rebuild" or even "Large Restoration/Remodel" for a project that is actually a restoration or repair job in an occupied home, every single labor line item in the estimate is reduced. The cumulative effect can undervalue the labor component of the entire estimate by 15-30%. On a $60,000 repair, that is $9,000 to $18,000 that disappears from the estimate with a single setting change.

What to do:Check the labor efficiency setting on the carrier's estimate. It is typically shown in the estimate parameters or profile settings. If it is set to anything other than Restoration/Service/Remodel for a standard repair job, flag it immediately.

2. Missing Line Items

This is the most straightforward category of error, and often the most significant in dollar terms. The adjuster simply did not include work that needs to be done.

• Failure to scope adjacent or related damage (e.g., water damage to framing behind fire-damaged drywall)
• Omitting detach-and-reset items (removing and reinstalling fixtures, appliances, or trim that must be moved to complete the repair)
• Ignoring protection of adjacent surfaces during construction
• Failing to include content manipulation (moving furniture and belongings to access repair areas)
• Omitting cleaning, HVAC duct cleaning, or odor remediation
• Leaving out temporary housing or additional living expenses during repairs

What to do:Walk the property with a qualified contractor or Public Adjuster and create a comprehensive scope. Compare it line by line against the carrier's estimate. Every missing item should be documented and included in your supplemental demand.

3. Wrong Measurements

Measurement errors are surprisingly common, particularly when the carrier's adjuster used Xactimate's sketching tools without adequate field verification or relied on aerial imagery for roof measurements.

• Roof area understated (failing to account for waste, pitch factor, or complex geometry)
• Room dimensions that do not match actual measurements
• Linear footage errors on trim, baseboards, or crown molding
• Failure to measure areas that are difficult to access

What to do:Take your own measurements. For roofs, obtain a professional measurement report (companies like EagleView and GAF QuickMeasure provide aerial measurement services, or measure the roof yourself). For interiors, measure every room. Compare your measurements against the carrier's sketch.

4. Missing Overhead and Profit (O&P)

Overhead and profit — typically 10% overhead and 10% profit, applied to the total estimate — represent the general contractor's compensation for managing, coordinating, and supervising the project. Carriers routinely omit O&P from their estimates, and the fight over O&P is one of the most common disputes in property insurance claims.

The general standard for when O&P is owed is this: when a general contractor is reasonably likely to be needed to coordinate and complete the repair, O&P must be included in the estimate.

What to do: If the carrier's estimate omits O&P and your repair involves multiple trades or any significant complexity, demand that O&P be added. Cite Verisk's own documentation acknowledging that general overhead is not included in line-item pricing. Provide your general contractor's bid showing O&P as a separate line item. For a detailed discussion of this issue, see our article on the three-trade rule and overhead and profit.

5. Incorrect Material Specifications

Xactimate contains thousands of line items for different materials at different quality levels. When the carrier's adjuster selects a lower-grade material than what was actually installed in your property, every affected line item is underpriced.

• Using builder-grade carpet pricing for high-end or custom carpet
• Selecting standard three-tab shingle pricing when the roof had architectural or designer shingles
• Pricing standard ceramic tile when the home had natural stone or custom tile
• Using stock-grade cabinetry pricing for semi-custom or custom cabinets
• Selecting standard plumbing fixtures when the home had high-end fixtures

Under California law, the insurer's estimate must be "of an amount which will restore the damaged property to no less than its condition prior to the loss." (10 CCR Sec. 2695.9(d).) If your home had custom finishes, the estimate must reflect the cost of custom finishes — not the cheapest alternative the adjuster can find in the Xactimate database.

What to do: Document what was actually in your home before the loss. Photographs, receipts, contractor records, and homeowner testimony all serve as evidence of pre-loss condition. For each material that is mispriced, identify the correct Xactimate line item or provide actual pricing from suppliers.

6. Depreciation Errors

For claims paid on an actual cash value (ACV) basis — which is usually the initial payment, even under a replacement cost policy — the carrier will deduct depreciation from the estimate. Depreciation errors are extremely common and take several forms:

• Depreciating items that should not be depreciated: Labor, for instance, does not wear out over time. Some carriers depreciate labor costs alongside material costs, effectively double-dipping. Many jurisdictions, including California, do not permit depreciation of labor.
• Using incorrect useful life figures: If the adjuster assigns a 15-year useful life to a roof that has a 30-year manufacturer warranty, the depreciation will be roughly double what it should be.
• Applying depreciation uniformly: Not all components of a repair depreciate at the same rate. A 20-year-old home may have a roof near end of life but cabinets in excellent condition.
• Failing to account for maintenance: A well-maintained component depreciates more slowly than one that has been neglected.

What to do: Review every depreciation line in the estimate. Check the useful life assigned to each category. Verify that labor is not being depreciated. Compare the depreciation percentages against industry standards and the actual condition of the property.

7. Missing Code Upgrades

When a property is repaired, the work must comply with current building codes — not the codes that were in effect when the home was originally built. If the building code has changed since original construction, the cost of bringing the repaired areas up to current code is an additional expense that should be reflected in the estimate.

• Electrical upgrades (GFCI outlets, arc-fault breakers, updated panel requirements)
• Plumbing upgrades (water heater strapping, backflow prevention)
• Energy code compliance (insulation requirements, window specifications, HVAC efficiency standards)
• Structural upgrades (seismic bracing, hurricane straps in applicable areas)
• Fire safety upgrades (smoke detectors, fire sprinklers in some jurisdictions)

Most homeowners policies include Ordinance or Law coverage as an endorsement, providing additional coverage — typically 10%, 25%, or 50% of the dwelling limit — specifically for code-mandated upgrades. Yet carriers routinely fail to include code upgrade costs in their estimates.

What to do: Have your contractor or a code consultant identify all applicable code changes since original construction. Prepare a separate code upgrade estimate in Xactimate. Submit it under the Ordinance or Law endorsement.

8. Wrong Geographic Pricing

Xactimate uses pricing databases that are updated monthly and organized by geographic region, typically by ZIP code. Errors occur when the estimate uses the wrong ZIP code, when the pricing database does not reflect actual costs in your market (particularly after catastrophic events when demand drives prices up), or when the carrier uses pricing from a lower-cost region.

California's Fair Claims Settlement Practices Regulations require that the insurer "take reasonable steps to verify that the repair or rebuilding costs utilized by the insurer or its claims agents are accurate and representative of costs in the local market area." (10 CCR Sec. 2695.9(d).) If the carrier's Xactimate pricing does not match what local contractors actually charge, the carrier is not meeting this standard.

What to do:Check the ZIP code on the carrier's estimate (it appears in the estimate profile). Compare Xactimate's unit prices against actual bids from local contractors. After catastrophic events, document market pricing with multiple contractor bids to demonstrate that Xactimate's database has not kept pace with actual costs.

How to Build Your Challenge

Step 1: Get the ESX File

The first and most critical step is requesting the carrier's native Xactimate file — the ESX file — not just the PDF printout.

An ESX file is a compressed archive that contains the complete estimate, including the sketch, all line items, notes, photos, estimate parameters, labor efficiency settings, and any internal comments the adjuster may have entered. A PDF printout may obscure or omit much of this information.

You have a right to receive the documents upon which the carrier's settlement is based. Under California's Fair Claims Settlement Practices Regulations, "if losses are settled on the basis of a written scope and/or estimate prepared by or for the insurer, the insurer shall supply the claimant with a copy of each document upon which the settlement is based." (10 CCR Sec. 2695.9(d).) The ESX file is the document — the PDF is merely a printout of it.

Step 2: Conduct a Line-by-Line Comparison

Once you have the carrier's ESX file, import it into your own copy of Xactimate (or have your Public Adjuster or estimator do so). Then create your own estimate of the same loss and compare the two line by line. For each discrepancy, document the specific line item code, the carrier's quantity and unit price versus yours, the reason for the discrepancy, and the dollar impact.

Step 3: Document Market Pricing

Obtain actual bids from licensed, local contractors. These bids serve two purposes: they demonstrate the actual cost of repair in the local market, and they provide independent evidence that the carrier's estimate is insufficient. Under 10 CCR Sec. 2695.9(d), the carrier is required to verify that its repair costs are "accurate and representative of costs in the local market area." If actual contractor bids consistently exceed Xactimate pricing, the carrier's estimate does not meet this standard.

Step 4: Reference Verisk's Own Documentation

Verisk publishes white papers and documentation on its pricing methodology, labor efficiency settings, overhead and profit, and depreciation. Key resources include:

• Overhead and Profit White Paper: Confirms that general overhead is not included in unit pricing
• Labor Efficiencies Design Document: Explains the different labor efficiency settings and when each is appropriate
• Labor Productivity in Xactimate Pricing: Details how labor rates are calculated
• Xactimate Pricing Methodology Summary: Describes how prices are surveyed and updated

When a carrier misuses a setting or misapplies Xactimate's methodology, Verisk's own documentation becomes evidence against the carrier's position.

Step 5: Present Your Challenge in Writing

Always — always — present your challenge in writing. Phone calls are useful for building rapport and understanding the adjuster's position, but they are not a substitute for a written demand that creates a clear record. Your written challenge should include:

1. A summary of the claim and the carrier's current estimate
2. Your revised estimate (in Xactimate format, if possible)
3. A line-by-line comparison identifying each discrepancy
4. Supporting documentation (contractor bids, measurements, photographs, material specifications)
5. Reference to applicable law and regulations
6. A specific dollar demand
7. A reasonable deadline for response

What to Do When the Carrier Will Not Budge

Invoke the appraisal clause. Most property insurance policies contain an appraisal clause that provides a mechanism for resolving disputes over the amount of a loss. Under California Insurance Code Sections 2070-2071, standard fire insurance policies must include an appraisal provision. Appraisal is faster and less expensive than litigation, it is binding, and it is focused exclusively on the amount of loss — which is exactly what an Xactimate dispute involves. For more detail, see our article on the appraisal process.

File a Department of Insurance complaint. In California, you can file a complaint with the California Department of Insurance (CDI) online at insurance.ca.gov or by calling 1-800-927-4357. A CDI complaint triggers a formal review and creates a regulatory record.

Understand the bad faith implications.When a carrier refuses to adjust an estimate that contains demonstrable errors — wrong measurements, inappropriate labor settings, missing line items, omitted O&P — the refusal raises questions that extend beyond the amount of the claim. Under California law, every insurance policy includes an implied covenant of good faith and fair dealing. A carrier that knowingly relies on a flawed estimate to underpay a claim may be exposing itself to a bad faith claim, which can result in damages far exceeding the original claim value.

Practical Tips for Policyholders

1. Do not accept the first estimate without review. The carrier's initial estimate is a starting point, not a final offer — even if the carrier presents it as one.
2. Hire a Public Adjuster or an attorney early. If the gap between the carrier's estimate and actual repair costs is significant, professional representation often pays for itself many times over.
3. Document everything. Photograph damage before any repairs. Keep every communication with the carrier. Save every version of every estimate.
4. Do not sign a release or accept a "final" payment without understanding what you are giving up. Some carriers will issue a payment with language suggesting it is "full and final settlement."
5. Understand recoverable depreciation. If you have a replacement cost policy, the carrier's initial payment is typically actual cash value. You are entitled to recover the depreciation once repairs are completed.
6. Get multiple contractor bids. Three bids from licensed, local contractors provide strong evidence of actual market pricing and make it much harder for the carrier to argue that its Xactimate estimate reflects reality.
7. Know your policy. Read your declarations page and your policy form. Understand your coverage limits, your deductible, your Ordinance or Law coverage, and your appraisal clause.

A Note for Attorneys

If you are representing a policyholder in a property insurance dispute, the Xactimate file is one of the most important pieces of evidence you can obtain. In discovery, request:

• The native ESX file(s) for every version of the carrier's estimate
• The carrier's internal Xactimate guidelines and estimating standards
• Training materials provided to adjusters regarding Xactimate settings
• Any corporate directives regarding labor efficiency settings, O&P, depreciation methodology, or material specifications
• The adjuster's field notes, photographs, and measurements
• Any internal communications referencing the estimate or the claim

Pay particular attention to whether the carrier's estimating practices are consistent across claims. If you can demonstrate that the carrier systematically uses labor efficiency settings, depreciation methodologies, or O&P exclusions that undervalue claims as a matter of corporate practice, you may have a basis for a broader bad faith claim and, potentially, class-wide relief.

This article is for informational purposes only and does not constitute legal advice. Insurance policies and applicable law vary by state and by policy form. Consult with a licensed professional regarding your specific situation.

Written by Leland Coontz III, Licensed Public Adjuster, CA License #2B53445.