Protection Gaps in Homeowners Insurance

Abstract

In the past few years the insurance community has paid increasing attention to the concept of “protection gaps”—the extent to which significant losses are not covered by insurance. Homeowners insurance is a key area in which these discussions have occurred, particularly as natural disasters have highlighted the increasing use of policies that do not provide adequate coverage to compensate for losses. Thinking about protection gaps and improving homeowners insurance requires clarity—clarity about what constitutes a homeowners insurance protection gap, where protection gaps occur, and what are the causes and cures of protection gaps. This paper analyzes those issues.

Keywords: insurance, homeowners insurance, protection gap, insurance coverage, insurance law, homeowner

JEL Classification: K19, K29, K39, G22