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Deductible vs Premium Trade-Off Calculator

Whether a higher deductible pays. The premium saving is certain and the extra claim cost is a probability, so the honest comparison also shows the worst case rather than only the expected value.

Also called: deductible comparison calculator, excess vs premium.

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Better option
The lower deductible

The lower deductible. The higher deductible saves $450.00 a year in premium and costs $800.00 a year in extra claim exposure, a net -$350.00 a year. Over 5 years that is -$1,750.00. Break-even is at 0.23 claims a year. A single claim costs 2000 more with the higher deductible. The premium saving arrives reliably; that exposure arrives all at once.

Premium saved
$450.00
Extra claim cost expected
$800.00
Net annual position
-$350.00
Net over the period
-$1,750.00
Break-even claims a year
0.23
Worst case extra cost in one year
$2,000.00
On the worst case
A single claim costs 2000 more with the higher deductible. The premium saving arrives reliably; that exposure arrives all at once.
How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

A higher deductible cuts the premium by a known amount and exposes you to a larger payment on each claim. Multiplying the deductible difference by expected claim frequency gives the expected extra cost, and comparing it to the premium saving gives a break-even claim rate. The expected value is not the whole answer though: the saving arrives reliably and the exposure arrives all at once, so the worst case matters. A higher deductible is right when you can absorb it comfortably and wrong when meeting it would require borrowing.

the premium saving is certain and the extra claim cost is expected, so the two are not equally reliable
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Deductibles
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Claims a year

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a 2,000 higher deductible

Premium with the low deductible
$1,800.00
Low deductible
$500.00
Premium with the high deductible
$1,350.00
High deductible
$2,500.00
Expected claims a year
0.4
Years to compare
5

Better optionThe lower deductible

The premium saving is 450 a year, certain. The deductible gap is 2,000, so at 0.4 claims a year the expected extra cost is 800, and the two break even at 450/2000 = 0.225 claims a year. Below that the higher deductible wins. Worked by hand.

Open this example

no claims makes the saving pure

Premium with the low deductible
$1,800.00
Low deductible
$500.00
Premium with the high deductible
$1,350.00
High deductible
$2,500.00
Expected claims a year
0
Years to compare
5

Better optionThe higher deductible

boundary: with no claims the deductible never applies, so the whole premium saving is kept

Open this example

Method and limits

What it assumes

  • Every claim exceeds the higher deductible, which small claims do not.

What it deliberately does not model

  • Claims smaller than the deductible are not claimed at all, which the expected value overstates.
  • A deductible that would require borrowing is not worth any premium saving.
  • Claim frequency is difficult to estimate from personal history.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Is a higher deductible worth it?
When you can absorb it without borrowing, usually yes, since the premium saving is certain. When meeting it would be difficult, the saving is not worth the exposure.