Insurance Premium Optimizer

For each plan, it takes the smaller of your Average Claim Amount and that plan's deductible, then multiplies by Average Claims Per Year. This reflects how deductibles actually work: a $500 claim against a $1,000 deductible costs you the full $500 out of pocket, but a $3,000 claim against that same $1,000 deductible only costs you $1,000, since the plan starts paying beyond the deductible. Using the smaller of the two values captures both cases correctly in one formula.

It's the number of claims per year at which the alternative plan's deductible disadvantage exactly cancels out its premium advantage, computed only when the alternative plan has both a lower premium and a higher deductible than your current plan -- the classic trade-off. File fewer claims than that number in a typical year and the cheaper-premium, higher-deductible plan comes out ahead; file more, and the extra deductible exposure outweighs what you saved on premiums.

Break-Even Claims Per Year is derived purely from the dollar gap between the two plans' annual premiums and the dollar gap between their deductibles -- it answers "how many maximum-exposure claims does it take," which doesn't depend on your typical claim size. Average Claim Amount does drive the separate Annual Savings figure, since a claim smaller than a deductible costs you less than the full deductible under either plan.

Not necessarily -- Annual Savings is an expected-value estimate built on your stated average claims history, which is inherently uncertain, and it doesn't account for your ability to absorb a bad year financially. A higher-deductible plan can have a better expected value on average while still being the wrong choice if a worst-case year's out-of-pocket exposure would strain your budget more than you're willing to risk.