Going without insurance can spell disaster for your finances. If no one will sell you the insurance you need, though, how are you supposed to protect yourself?

It's becoming increasingly difficult for many consumers to find insurance to cover certain types of risk. Many insurers have stopped writing new insurance policies in many regions of the country, especially those in which risks are high and claim histories have been particularly bad. Allstate (NYSE:ALL) recently stopped writing new home policies in California, after having cut back on new business in disaster-prone areas in Florida, Louisiana, and Mississippi. This has had an effect on the reinsurance market in many states as well, in which companies such as Montpelier Re (NYSE:MRH) and Renaissance Re (NYSE:RNR) have battled state insurance commissions for the right to charge rates that fully compensate the insurers for their risk.

Although homeowners' insurance has gotten the lion's share of media attention, residents in many states have also had trouble getting other types of policies, including health, disability, and auto insurance. In most cases, these problem areas involve high levels of risk in which insurance companies aren't allowed to charge the rates necessary to cover expected costs of claims.

Winners and losers
It's easy to see this as another example of corporate greed taking advantage of hapless consumers, but the issue isn't that simple. Policyholders in many areas stand to benefit when insurance companies choose to take on less exposure to risky events. It's likely that despite state regulation intended to protect consumers from the consequences of out-of-state losses, insurers end up passing on the high costs of catastrophic events on to all their customers. If they can avoid these catastrophic events, therefore, insurers may pass on some of the savings to their customers.

The problem is that those who have the most risk exposure find hat they're unable to protect themselves. One may not be terribly sympathetic toward wealthy beachfront homeowners whose million-dollar mansions get damaged in hurricanes, but countless modest communities are also devastated by disasters every year, from towns hit by tornados in the Great Plains to flood-prone farming communities along rivers in the Midwest.

When private insurance is unavailable, governments typically step in to fill the gap. Some states have government-managed risk pools that are the insurer of last resort for high-risk insurance policies. In other cases, the government ends up paying for those who go without insurance, through agencies and programs like FEMA and Medicaid. As taxpayers, we foot the bill for these solutions.

Searching for solutions
Consumer groups have had little success finding ways around problems of finding insurance coverage. In the health insurance realm, however, major corporations like Wal-Mart (NYSE:WMT), Intel (NASDAQ:INTC), and AT&T (NYSE:T) have joined labor and public policy groups in favor of universal health-care coverage. Because health coverage has become an ever-growing burden on employers that provide benefits to employees, businesses stand to gain at least as much as workers from any program that reduces their reliance on expensive insurance.

It's unclear whether a universal government risk pool or private insurance coverage is the best answer to the problem of spreading risk. What is clear, however, is that the current state of affairs, in which insurance companies cherry-pick the most profitable markets, marks a dangerously flawed system that abandons those most in need of assistance. Just as utility companies were originally forced to provide service to remote locations no matter the cost, insurers and governments must find a way to cover the entire spectrum of risks to avoid letting anyone slip through the cracks.

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Fool contributor Dan Caplinger found coverage for his home, but self-employed health insurance is a more difficult thing. He doesn't own shares of the companies mentioned in this article. Montpelier Re is a Stock Advisor and Hidden Gems pick. The Fool's disclosure policy covers you through thick and thin.