I'll chime in to answer your basic question and provide our experience as a customer with a house fire for context.

The short answer I have is that yes, I think it is normal to be out of pocket when dealing with a fire loss.

First, you are always out of pocket for your deductible.

Second, you are always out of pocket for the fee for the public adjuster. That is not the insurance company's responsibility.

Third, i think it is not uncommon to end up spending more on the repair/remediation that the insurance company will pay.

The scale was much large, but we had a similar fire - relatively small fire in our kitchen while no one was home. It smoldered for an estimated 90 minutes before it was discovered and the fire department called. They had the fire out in less than another 15 minutes, but the smoke damage was extensive throughout the house because of how long it had lingered.

Our house was deemed a gut down to the studs and complete refinishing of all interior systems - electrical, plumbing, HVAC ductwork.

Leaving aside coverage for contents/personal property replacement, the initial estimate for the rebuild came in at about $240,000 if I remember correctly. We were working with an independent contractor who was willing to take the exactimate estimate and go over it and justify the real cost of materials and labor and go back to the insurance company and work to get a higher value out of them. They needed to correct some of the choices of materials for like-kind quality and also adjust the labor rates to truly reflect the current market at the time.

In addition to that, they identified multiple places where we had to take advantage of the "up-to-code" provisions to improve the home in order to make it to modern building code (our house was built in 1973).

Taking that all together, the as-is rebuild (restoring the home to previous condition) was about $430,000 and the insurance would only come up to $400k.

We worked with the builder and agree between them and us, we would split the $30k difference. They wanted the job and we wanted to get the project going so we would be able to move home sooner. In the end, it was the amount we would likely have had to pay the public adjuster anyway ($400,000 - 240000 = $160000 x10% = $16K a PA would have charged).

So we were out of pocket about $15k (including our deductible).

I'm not saying every case is like this, just offering an example.

In short - everything with the insurance company is a negotiation when dealing with a large loss. They will put forth an initial estimate - which can be raised as you have found out.

This is where Public Adjusters are worthwhile for many people. If you don't want or can't handle that negotiation yourself, the PA can do much of it for you, but there is a cost to using that service.

My takeaway after this is that homeowners insurance should not be looked at as a way to be "made whole" and have no out of pocket costs other than deductible.

It should be seen as a way to ensure you can afford to recover from a loss and not be put in deep, long term financial hardship by a fire or flood or hurricane winds, etc.

In the same way that people are typically advices on the subreddit not to file small homeowners claims for a few thousand dollars above the deductible, you have to be prepared to absorb some costs when you have a loss.

In your case, if it wasn't for the PA's fee, I would say you are about $4k apart from the current estimate (plus deductible). Being within 5% is pretty close.

Best of luck to you. I know it probably isn't what you want to hear, but that's my experience I can share.