AI Hallucination Warranty Reserve Calculator

Offer service-level credits confidently by quantifying how much to escrow for hallucination claims. Feed in the number of monthly responses under warranty, your expected hallucination rate, and the contractual payout per incident. Optional fields layer in investigation labor and a contingency buffer so you can publish a reserve policy that survives executive, legal, and insurance scrutiny.

Total prompts or API calls promised under the warranty each month.
Share of responses you expect to trigger a refund-worthy hallucination.
Credit, refund, or service-hours value promised for each validated hallucination.
Analyst or engineer time required to review each claim.
Additional margin to absorb spikes, legal costs, or arbitration.

Financial planning tool only. Coordinate with finance, legal, and insurance teams before publishing warranty language.

Examples

  • 60,000 covered responses, 1.2% incident rate, $75 payout, $180 investigation cost, 30% buffer ⇒ Expected validated incidents: 720.00 • Monthly reserve (with buffer): $99,360.00 USD • Buffer contribution: $22,944.00 USD (23.09%) • Annualized reserve: $1,192,320.00 USD • Reserve per interaction: $1.66 USD • Reserve per incident: $138.00 USD • Cost mix — Credits: 57.58%, Investigations: 19.32%
  • 15,000 responses, 0.4% incident rate, $120 payout, investigation left blank, buffer left blank ⇒ Expected validated incidents: 60.00 • Monthly reserve (with buffer): $9,000.00 USD • Buffer contribution: $1,800.00 USD (20.00%) • Annualized reserve: $108,000.00 USD • Reserve per interaction: $0.60 USD • Reserve per incident: $150.00 USD • Cost mix — Credits: 66.67%, Investigations: 26.67%

FAQ

Can I separate partial and full refunds?

Yes. Weight the payout per incident by the mix of partial credits versus full refunds before entering it here so the reserve reflects your true liability.

How often should I refresh the reserve?

Recalculate monthly using the latest response volume and incident rates, then true-up the reserve balance in your billing or revenue recognition workflow.

Does this include reputational damage or customer churn?

No. The reserve only covers contractual payouts and operational handling costs. Model churn risk separately in your go-to-market forecast.

What if incidents spike above the buffer?

Increase the contingency percentage or rerun the calculation with a higher incident rate drawn from stress tests to see the reserve needed for a worst-case month.

Additional Information

  • Pair the reserve with quality metrics such as retrieval coverage, grounding rates, and safety classifier precision to prove diligence to enterprise buyers.
  • Use historical production logs or red-team audit data to anchor the incident rate—update it monthly as models and guardrails improve.
  • Buffers absorb arbitration, legal review, or third-party audit costs that arise when enterprise customers dispute hallucination rulings.

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