Some sixteen million people in the UK don’t have contents insurance, according to new research. And what’s more, they’re mainly from poorer households meaning they couldn’t afford to replace household items if they needed to. This is the insurance gap – where those who can’t afford cover could miss out.

Now a group of MPs, peers and charities are looking at how this could change. We’ll take you through what the insurance gap is and how it can affect poorer families. And we’ll also look at some of the ways that this could improve in the future.

What is the insurance gap?

As we explained above, the insurance gap is when poorer households can’t afford the cost of contents insurance. There are other reasons why they might not get contents insurance – such as that they don’t trust the insurance industry.

According to the research, the majority of those without contents insurance are tenants. It found that poorer households were also more at risk of burglary, arson and flooding – so contents insurance would definitely be important.

But the reason these households didn’t have contents insurance was because they couldn’t get an affordable policy. This meant that if they lost or broke a household item or there was a break-in, they’d have to cover the cost of new items on their own.

As these families are on lower incomes, it’s likely that they couldn’t afford to do this outright. The research shows that only a quarter of social housing residents have enough savings to replace a washing machine. This could mean they’d have to borrow from friends or family members to afford a new one, or to turn to credit. Or if they couldn’t do this, they’d have to go without.

This research was for the Financial Inclusion Commission. This is an independent campaigning body aiming to encourage financial inclusion. And this is the group who are looking to get rid of the insurance gap going forwards.

What is the Financial Inclusion Commission suggesting?

One proposal is that social landlords could automatically sign tenants up for contents insurance, but let them opt out of this. This would ensure that social tenants had contents insurance by default. If they still couldn’t afford to pay for it, they would be able to stop the cover.

Another initiative is to teach people about the value of contents insurance. If people understood how contents insurance could protect them in the event of a break-in or a fire, they might be less likely to opt out of its protection.

The Financial Inclusion Commission also said that the insurance sector needs to make sure that everyone has access to contents insurance. It’s now calling on the Government to develop a financial inclusion strategy, and this would ensure that all people were able to get the level of insurance cover they need.