What does "coverage gap" in insurance signify?

The term "coverage gap" specifically refers to a lack of protection that arises due to exclusions in a policy or insufficient policy limits. In insurance, policies outline what risks are covered and the extent of that coverage, often specifying certain situations that are excluded altogether or setting limits on the amount that can be claimed. If a policyholder encounters a situation that falls outside the covered risks or exceeds the policy limits, they face a gap in coverage, leaving them unprotected in that specific scenario. Understanding this concept highlights the importance of carefully reviewing policy details to ensure adequate coverage and to identify any gaps that may exist.