The Growing Coverage Gap: Why Safety Nets Matter

Across the United States, an increasing number of insurance consumers, both personal and commercial, are going without coverage—not because risk is lower, but because insurance is becoming less affordable and, in some regions, unavailable. Recent analyses estimate that nearly one in seven owner-occupied homes, approximately 13.6 percent or 11.3 million properties, are uninsured. Other surveys place the figure between seven and twelve percent, but consensus indicates the share of uninsured homes is rising. Similar affordability and availability challenges are emerging for commercial property owners and businesses, especially in high-risk areas.

More than forty percent of U.S. homeowners are mortgage free, and these households are significantly more likely to be uninsured, as lenders no longer require coverage. Manufactured home and inherited property owners also exhibit higher rates of noninsurance, often due to lower incomes and unique coverage challenges. In the commercial sector, small businesses and property owners face parallel pressures, with rising premiums and stricter underwriting standards making coverage difficult to obtain. When insurance is absent, risk and the costs associated with it do not disappear; instead, it shifts to families, business owners, mortgage holders, local governments, taxpayers, and the broader economy, particularly when communities and enterprises face challenges rebuilding after disasters.

The insurance industry is actively investigating partial, lower cost safety net solutions that offer protection between full coverage and going uninsured for both personal and commercial insurance buyers. While no single carrier or product can fully close the coverage gap, well designed safety nets can play a constructive role as part of a broader ecosystem.

Several approaches are under consideration, each with distinct tradeoffs. High deductible, partial limit covers aim to keep premiums below full rates, provide more protection than federal grants alone, and help preserve equity and habitability after major losses. These solutions are relevant for homeowners and commercial property owners alike. While offering meaningful value compared to going uninsured, customers must understand that significant risk remains, the possibility that losses exceed policy coverage. Clear communication is essential to manage expectations and minimize dissatisfaction or litigation following catastrophes.

Parametric micro covers and sublimit pay a fixed amount when an objective trigger is met, such as hurricane wind speeds or wildfire proximity. These solutions deliver fast, low friction payouts at relatively low administrative cost, which is critical for cash constrained customers after disasters. Parametric products are increasingly being adopted for both personal and commercial risks, providing rapid liquidity to households and businesses. However, basis risk persists; triggers may activate when damage is minimal or miss events when destruction occurs just outside the defined area. Transparency and simplicity are vital.

Community pools and public private structures such as reciprocal exchanges, captives, or municipal programs paired with catastrophe reinsurance and parametric triggers can spread risk more efficiently. These models reward collective mitigation and may secure better terms than fragmented individual buying but require strong governance and often public sector partnership. Such structures can be tailored for residential communities, business districts, or industry groups.

Embedded and builder driven coverage at natural transaction points, such as new home sales, affordable housing onboarding, or commercial property transfers, can reduce friction and maintain protection as budgets tighten. Pairing insurance with mortgages, HOA dues, rent to own structures, or commercial leases, alongside mitigation grants, can help sustain coverage for both individuals and businesses.

Collectively, these strategies represent a toolkit for expanding protection for specific segments. However, none can fully offset underlying risk growth, cost inflation, or legal and regulatory constraints. Safety net products can serve as an important bridge between full coverage and no coverage, but must be presented, priced, and governed as such—not as comprehensive solutions. Product design alone cannot resolve the affordability crisis. Factors such as climate amplified catastrophe risk, housing and income constraints, legal dynamics, and long-standing land use decisions extend beyond the scope of any single carrier or program.

The most effective path forward involves coordinated action. Governments and regulators invest in mitigation, modernize building codes, and support low- and moderate-income households and small businesses. Residual markets and public programs strengthen transparency and clarify roles relative to private carriers. Carriers and reinsurers innovate responsibly around partial covers, parametric, and community solutions. Agents and brokers guide clients through tradeoffs and help at risk households and businesses avoid going uninsured.

Safety nets can contribute meaningfully, but only as part of a broader, disciplined strategy that addresses the needs of both personal and commercial insurance consumers. &