Back-To-Back Deductible

Insurance is a necessary evil. In purchasing insurance, we are transferring risk to a third party in return for the payment of our premium.

A policy can be tweaked in a number of ways to get a lower premium through the online policy calculators that all insurance carriers offer. One of the easiest ways to lower your premium is to increase the deductible from $500 to $1,000 per claim, for example. Raising the deductible is transferring less risk to the insurance company, which means the insured would pay more out of pocket if they had a claim.

A consumer can go to extremes. For example, to lower premiums as much as possible, a person could purchase a back-to-back deductible policy. The ordinary deductible was, let's say, $500. But to get an even lower premium, the insured added a second deductible of $500, or a back-to-back deductible. Therefore, on a claim of $1,000, the insured would foot the whole bill.