It found that three firms account for over 80% of the Irish market
The Central Bank has said companies that offer gadget insurance need to provide "clear and understandable information" to consumers.
The bank has published the outcome of a thematic inspection of the sale of gadget insurance.
It found mobile phone insurance is the most common type, and is generally sold to consumers as an add-on when they buy a new phone.
Three insurance firms were inspected, which the bank found account for over 80% of the Irish market.
The bank found that, in certain circumstances, product information provided to consumers was inadequate.
It said: "Manufacturers and distributors of gadget insurance need to do more to ensure that consumers are made aware of the key product features, benefits, exclusions, how to make a claim, and the total cost of the product".
The inspection revealed that inadequate information is provided to consumers at the point of sale and during the life of their policy, which can be up to five years.
The Central Bank said firms should provide an annual statement to consumers detailing their policy - including benefits/exclusions, premium details and how to make a claim.
It also found that 21% of consumers did not cancel existing policies after taking out a new gadget insurance policy.
This meant they were paying for cover they no longer needed, and could have been paying 'on the double'.
It said sellers of gadget insurance are required to consider any relevant existing insurance cover when recommending a new policy.
While it also found that claims acceptance rates on gadget insurance were high, at an average of 91.6% across the firms inspected.
The Central Bank's director of consumer protection, Gráinne McEvoy, said: "With the Christmas shopping period well underway, many people will be making practical decisions to buy gadget insurance for their new phones.
"Our inspections and consumer research show that there is a gap between what most consumers believe their gadget insurance covers and what it actually covers.
"As many consumers buy this type of insurance as an add-on when buying a new mobile phone, it is really important for sellers to ensure that the product they sell meets the consumer's individual needs.
"Sellers of gadget insurance must also be very clear to consumers about the product terms, cost, conditions and limitations and inform consumers that they have a cooling off period if they subsequently decide that they do not want to keep the insurance product."