We explore empirically how households insure themselves against consumption volatility.
We asked households how they would fund an unexpected emergency consumption expense
equivalent to one month's income. Answers reveal a range of consumption insurance
mechanisms, including borrowing from credit markets and social networks. Despite this,
more than one fifth of households have no plan to insure their consumption. The likelihood
of non-insurance increases with poor financial literacy and is highest among households
most at risk of experiencing a financial shock. Among these households we see large
effects of poor financial literacy on non-insurance. (C) 2018 The Author(s). Published
by Elsevier B.V. This is an open access article under the CC BY license.