Product Liability Deductible Tradeoff Calculator

How to use this calculator

1. Enter the annual premium and deductible for both quotes.
2. Enter a planning estimate for the annual probability of one covered claim.
3. Calculate and compare expected annual cost, premium savings, and retained exposure.
4. Review the break-even probability and verify policy terms before deciding.

Formula

Expected annual cost = annual premium + (deductible × annual claim probability)

Break-even probability = (lower-option premium − higher-option premium) ÷ (higher deductible − lower deductible).

What the result means

The main result is the smaller probability-weighted annual cost among the two options. It balances certain premium cost with the modeled deductible exposure from one covered claim.

Insurance terms vary. This estimate assumes at most one deductible-bearing claim in the year and does not model claim severity, defense-cost treatment, exclusions, taxes, or multiple claims.

Example calculation

Option A costs $5,200 with a $2,500 deductible. Option B costs $4,100 with a $10,000 deductible, and the assumed annual claim probability is 8%.

A: $5,200 + $2,500 × 0.08 = $5,400
B: $4,100 + $10,000 × 0.08 = $4,900

Option B is lower by $500 in expected annual cost. The break-even probability is $1,100 ÷ $7,500 = 14.67%.

Tips for better results

• Compare quotes with equivalent limits, exclusions, and defense provisions.
• Keep enough liquid cash to absorb the chosen deductible.
• Test a higher claim-probability scenario before relying on premium savings.
• Confirm whether one deductible applies per claim or per policy period.
• Ask whether defense expenses erode the limit or trigger the deductible.