Deductible Absorption Calculator

Higher deductibles reduce premium but absorb more loss. This calculator models the trade-off.

Deductible

Expected claims/yr

Premium savings/yr

Net annual cost

$29,000

Expected absorption

$37,500

Net benefit / (cost)

-$29,000

How the math works

Absorption = deductible × expected claims. Net = absorption − premium savings.

Favorable deductibles require positive net benefit. If absorption exceeds premium savings, lower deductible is wiser. Review after 2-3 years of loss history.

How to Use

Enter deductible amount.
Enter expected claims per year.
Enter premium savings from deductible.
Read net annual cost.

Frequently Asked Questions

Deductible economics?

Higher deductible = lower premium + higher self-absorbed loss. Typical trade-off: $5k deductible to $25k saves $2-6k/year premium. Worthwhile if you average less than 1 claim annually above new threshold.

Optimal deductible?

Set at level where expected annual losses × probability ≤ premium savings. For most commercial properties, $10-25k deductibles are sweet spot. Higher only with reserves and loss history.

Claim frequency?

Multifamily: 2-5 claims/year typical. Retail/mixed-use: 1-3. Office/industrial: 0.5-2. High-frequency operations need lower deductibles or loss-sensitive programs.

How do insurance carriers view this?

Insurance carriers underwrite per-peril and often stack deductibles — named storm, wind, hail, flood, and standard can all apply separately on a single event. Confirm with your broker which deductibles actually apply to your policy and stress-test liquidity against the highest applicable deductible. Endorsements and riders can modify base terms; read declarations carefully and keep a written summary on file for claim time.