Ever feel like you’re paying for a dozen insurance policies that don’t add real value? The 80/20 rule, also called the Pareto Principle, can help. It says that roughly 20% of your expenses give you 80% of the benefit. Apply that to insurance and you’ll see which policies actually shield you from big losses and which are just extra weight.
Start by listing every policy you own – home, car, health, pet, travel, life, gadgets, you name it. Next, rank them by the amount of financial risk they cover. A mortgage protection plan or a comprehensive car policy usually guards the biggest assets, so they belong in the top 20%.
Ask yourself three quick questions for each policy:
If the answer is “yes” for most, keep it. If not, it’s likely part of the 80% that isn’t giving much back.
Now look at the remaining policies. Are you paying for duplicate coverage? Maybe a landlord insurance policy already includes some liability that your personal home policy also covers. Could a higher deductible on your car policy drop the premium without exposing you to huge out‑of‑pocket costs?
Switching to a pay‑as‑you‑go health plan or dropping coverage for low‑value items (like an old laptop) can shave off hundreds of pounds a year. Always compare the premium you pay to the maximum claim you could receive – if the ratio feels off, it’s time to reconsider.
Don’t forget to shop around. The same level of protection can cost less with a different provider. Use comparison sites, ask for quotes, and ask insurers to explain any fees. A quick call can often uncover hidden discounts.
Finally, set a yearly review date. Insurance needs change as you move, upgrade assets, or your family grows. A 30‑minute check‑in each year keeps you from letting unnecessary policies slip back in.
By applying the 80/20 rule, you focus on the essential policies that truly protect you while cutting the rest. You’ll keep more money in your pocket without sacrificing safety.
Got a specific policy you’re unsure about? Write down its cost, the risk it covers, and the likelihood of that risk. If the numbers don’t add up, drop it or look for a cheaper alternative. Your insurance budget should work for you, not the other way round.
Start today: grab your policy statements, run the three questions, and trim the excess. You’ll see a clearer picture of where your money is actually doing the heavy lifting.
The 80/20 rule in insurance is all about cost-sharing: your insurer covers 80%, you pay 20%. Learn how this affects medical bills, deductibles, and what to watch out for.
