Benefit-Cost Analysis is the method by which the future benefits of a hazard mitigation project are determined and compared to its costs.

A Benefit-Cost Analysis is based on a comparison of the total eligible cost for the mitigation measure to the total value of expected benefits. Benefits include reduction in:

• Damage to the facility and its contents
• The need for emergency protective measures
• The need for temporary facilities
• Loss of function
• Casualties (typically only for earthquake, tornado, and wildfire mitigation)

The result is a Benefit-Cost Ratio, which is calculated by a project's total benefits divided by its total costs.

The Benefit-Cost Ratio is a numerical expression of the "cost-effectiveness" of a project. A project is cost effective when the Benefit-Cost Ratio is 1.0 or greater, indicating the benefits of a prospective hazard mitigation project are sufficient to justify the costs.