Insurance deductible comparison calculator to compare premiums and per-claim deductibles, estimate long-term cost, and find break-even claim frequency.
Insurance Deductible Comparison Formula
For policies that apply a deductible to each covered claim, a simple expected annual cost combines the premium with expected deductible payments:
Expected Annual Cost = Annual Premium + Expected Claims * min(Average Claim, Deductible)
The break-even claim count sets the two plans' expected costs equal:
Break-Even Claims = (Premium_B - Premium_A) / (Claim Cost_A - Claim Cost_B)
Variables:
- Annual Premium is the fixed yearly cost of the policy
- Expected Claims is the average number of covered claims per year
- Average Claim is the modeled covered amount of each claim
- Claim Cost is the smaller of the claim amount and the deductible
- Break-Even Claims is the annual claim frequency at which the two modeled costs are equal
This model is most appropriate when the deductible resets for each claim. Health insurance usually uses an annual deductible and requires a different plan-comparison method.
Premium and Deductible Trade-Offs
This example compares Plan A at $1,800 per year with a $500 deductible and Plan B at $1,400 with a $1,500 deductible. The average claim is $5,000.
| Claims per year | Plan A expected cost | Plan B expected cost | Lower cost |
|---|---|---|---|
| 0 | $1,800 | $1,400 | Plan B |
| 0.25 | $1,925 | $1,775 | Plan B |
| 0.50 | $2,050 | $2,150 | Plan A |
| 1.00 | $2,300 | $2,900 | Plan A |
Example Problems
Example 1: Compare expected five-year cost.
Plan A costs $1,800 per year with a $500 deductible. Plan B costs $1,400 with a $1,500 deductible. You expect 0.25 claims per year averaging $5,000.
Expected annual costs are $1,925 for Plan A and $1,775 for Plan B. Over five years, Plan B is lower by about $750.
Example 2: Find the break-even claim frequency.
The annual premium difference is $400, while Plan B costs $1,000 more out of pocket for each average claim.
The plans break even at 0.4 claims per year, or about one claim every 2.5 years.
Frequently Asked Questions
Should I always choose the plan with the lowest expected cost?
Not necessarily. A higher deductible creates more cash-flow risk when a loss occurs. Emergency savings, coverage limits, exclusions, service, and risk tolerance also matter.
What if the claim is smaller than the deductible?
The model limits out-of-pocket claim cost to the claim amount. A $700 covered loss cannot create a $1,500 deductible payment, though the insurer would pay nothing.
Can I use this for health insurance?
Use a health plan comparison instead. Health deductibles usually accumulate annually and interact with coinsurance, copays, networks, and out-of-pocket maximums.
