How does the deductible break-even math work?
Premium savings equal the lower-deductible premium minus the higher-deductible premium. The extra out-of-pocket per claim is the difference between deductibles. Break-even years equal the extra deductible divided by savings. The expected yearly advantage subtracts the extra deductible spread over the visitor's average years between claims from the yearly savings.
With $500 more deductible and $150 a year in savings, the visitor breaks even after about 3.3 claim-free years. If they average a claim every five years, the expected advantage is $150 minus $100, or $50 a year in favor of the higher deductible.
The recommendation row names the option that comes out ahead on those assumptions. The disclaimer is candid: claims are irregular, some losses are smaller than either deductible, and premium increases after claims are not modeled.
- Works on auto, home, renters and business policies
- Percentage deductibles (such as 2% wind) can be entered as dollar amounts
- Uses only the premiums the visitor enters; it never prices coverage