When an insurance adjuster inspects property damage and produces an estimate, that estimate is almost certainly generated by computerized estimating software. The dominant platform in the property insurance industry is Xactimate, a program used by the vast majority of carriers, independent adjusting firms, and public adjusters to calculate the cost of repairing or replacing damaged property. Understanding how this software works — and where its outputs can diverge from actual repair costs — is essential for any policyholder navigating a property damage claim.
What Xactimate Is and How It Works
Xactimate is an estimating platform that uses a database of material and labor costs to generate line-item repair estimates. The adjuster inputs the scope of work — the specific repairs needed, the quantities involved, and the materials required — and the software calculates the cost based on pricing data for the geographic area where the property is located.
The pricing database is updated monthly and draws on surveys of material suppliers and labor markets. Each line item in an Xactimate estimate includes a unit price that reflects the software's assessment of what the repair should cost in that specific area. The line items are granular — a single estimate may contain hundreds of individual entries covering demolition, materials, labor, equipment, and disposal for each affected area of the property.
The software is powerful and widely accepted, but it is only as accurate as the information entered into it. The adjuster decides what line items to include, what quantities to assign, and what quality of materials to specify. The software does not inspect the property — the adjuster does. This means the accuracy of the estimate depends on the thoroughness and judgment of the person creating it.
Where Estimates Can Fall Short
Several common issues cause Xactimate estimates to understate the actual cost of repairs.
Scope omissions. The most frequent source of underpayment is not a pricing error but a scope error — the adjuster simply did not include all of the necessary repairs. Damage that is hidden behind walls, above ceilings, or beneath flooring may not be identified during a brief field inspection. Related repairs that are required by building codes but not directly caused by the damage event — such as upgrading electrical panels or adding fire stops — may be omitted entirely.
Pricing discrepancies. While the Xactimate pricing database is generally reasonable for standard repairs, it does not always reflect the actual market in every area. In regions with high demand for contractors — particularly after widespread storm events — actual labor and material costs can significantly exceed the prices in the database. Custom materials, specialty trades, and hard-to-source components may also be priced below their true market cost.
Missing overhead and profit. General contractor overhead and profit is a standard component of repair costs when the scope of work requires a general contractor to coordinate multiple trades. However, some carrier adjusters exclude overhead and profit from their estimates, arguing that the policyholder has not yet retained a general contractor or that the work can be performed by a single trade. This omission can reduce the estimate by ten to twenty percent.
Depreciation methodology. For claims paid on an actual cash value basis — or for the initial ACV payment on a replacement cost policy — the depreciation applied to each line item can significantly reduce the payout. Depreciation rates are often applied within the software based on age and useful life assumptions, and these assumptions may not accurately reflect the condition of the damaged property.
How Policyholders Can Respond
Policyholders are not obligated to accept the carrier's Xactimate estimate as final. The estimate is a starting point for negotiation, and it can be challenged on both scope and pricing.
Obtaining an independent estimate is the most effective way to identify discrepancies. Public adjusters, contractors, and restoration professionals can prepare competing Xactimate estimates that include line items the carrier's adjuster missed, reflect actual market pricing, and account for overhead and profit where applicable. Because the competing estimate uses the same software, it allows for a direct, line-by-line comparison that makes disagreements specific and quantifiable.
Policyholders should also request the full Xactimate file from the carrier — not just a summary or a payment letter. The detailed estimate shows every line item, every unit price, every depreciation calculation, and every note the adjuster entered. Reviewing this document line by line, or having a professional review it, often reveals errors and omissions that are not apparent from a payment summary alone.
The Role of Supplements
When additional damage is discovered during repairs — or when the initial estimate omitted necessary work — policyholders can submit a supplement request to the carrier. Supplements are formal requests to add scope to the estimate, and they are a normal part of the claims process. Carriers expect supplements on complex claims, and the supplement process allows the estimate to be revised as the true scope of work becomes clear.
Supplements should be documented with photographs, measurements, and a revised Xactimate estimate showing the additional line items and their costs. The more detailed and well-supported the supplement, the more likely the carrier is to approve it without protracted negotiation.
Key Takeaway
Xactimate is a tool, not a verdict. The estimate it produces is only as complete as the scope entered by the adjuster and only as accurate as the pricing data for the local market. Policyholders who understand how the software works are better equipped to identify what is missing, challenge what is underpriced, and pursue supplements when additional damage is found. A low estimate is not the end of the conversation — it is the beginning of the negotiation.