What does the term "coverage gap" refer to in insurance?

The term "coverage gap" specifically refers to an area of exposure that is not covered by a policy. This gap can arise for various reasons, such as exclusions in the policy terms or limitations on the types of risks that are insured. Identifying coverage gaps is crucial for policyholders because it highlights areas where they may be vulnerable to losses that will not be compensated by their insurance, emphasizing the importance of thoroughly reviewing insurance policies to ensure adequate protection against potential risks. Understanding this concept helps individuals and businesses make informed decisions about how to best safeguard their assets and address their insurance needs comprehensively.