The Blockchain industry has taken the world by storm and has grown tremendously to become a big industry in the investment world.
There’s barely anyone who hasn’t heard about or used cryptocurrency to perform a transaction at one point or the other.
Cryptocurrency like any other investment has its share of risks and needs to be insured from hacks and theft. But the volatility of cryptocurrencies combined with the fact that it’s not regulated by government policies has made things complicated.
A few companies have signed up for insuring cryptocurrencies while others have been reluctant to dive in head first. If you are looking to insure your cryptocurrencies or are just curious to learn about crypto insurance we’ve got you covered.
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WHAT IS CRYPTO INSURANCE?
Crypto insurance is an insurance that covers the loss of cryptocurrencies through theft, hacks, and cyber attacks. The nature of crypto insurance policies is quite different from the regular insurance of stocks, bonds, and properties.
The demand for crypto insurance has been on the rise as a result of an increase in crypto theft and scams. The biggest hack recorded as of the time of writing was on the Ronin network which is under a blockchain-based game Axie infinity, where a hacker made away with a staggering $625 million.
Another notable cyber attack was on the FTX exchange which filed bankruptcy after more than $600 million was stolen from their crypto wallets.
To add salt to injury over $570 million was also stolen from the high-profile Binance exchange in October 2022, where hackers manipulated the BSC token and created extra Binance coins(BNB) worth 2 million BNB tokens.
All these have led to the emergence of crypto insurance companies like Lloyd of London, Relm insurance, and Coin cover. But many insurance companies are not willing to provide coverage for cryptocurrencies because there are no rigid insurance policies on digital assets.
HOW DOES CRYPTO INSURANCE WORK?
Crypto insurance like any other insurance policy covers the Loss of crypto tokens. It helps crypto users to recover their lost coins provided that it is covered by the insurance plan.
Presently, most insurance companies provide losses for only crypto exchanges while some companies like Breach insure personal wallets in some states in the United States
Similarly, Coin cover provides insurance for native Coin base users and covers losses from hacks and thefts. As self-assuring as crypto insurance may be, it only covers a certain percentage of losses. For instance, in a situation of an exchange-wide cyber attack, the policy might not cover the full amount of the funds in your wallet.
If you want full reimbursement for any kind of loss then you may need to purchase several insurance policies. Crypto insurance is still a young industry with a lot of complexities as a result of the decentralized nature of the Blockchain network but still has room for development.
HOW MUCH DOES CRYPTO INSURANCE COST?
The cost of crypto insurance is dependent on several factors, the amount of insurance purchased, levels of coverage in terms of theft and hacks, and the insurance company or policy in question.
WHO INSURES CRYPTOCURRENCY?
Cryptocurrency is insured by insurance agencies and some exchanges. Though there are just a handful of crypto insurance companies because cryptocurrencies are speculative.
You might already be insured by your crypto exchange, as exchanges like Coin base, Block-Fi, Coinlist, and Bitstamp have insurance coverage for their users. The insurance provided by exchanges usually covers an exchange-wide cyber attack but might not cover an individual hack or theft.
IS CRYPTO INSURED BY THE GOVERNMENT?
The answer is a definite No. Cryptocurrencies are not insured by government insurance policies. This is because of several factors like its complexity, volatility, and decentralized nature.
It makes it easy for people to make a way with huge amounts of money in their wallets, unlike traditional bank accounts which can be blocked if illegal activities are noticed.
WHICH CRYPTO EXCHANGES HAVE INSURANCE?
You might want to read the boring stuff on the terms and conditions of your crypto exchange to know if there is an insurance cover.
Most of the time exchanges insure themselves by tucking away a fraction of transaction fees from users on their platform. While in other situations they will be working with commercial crypto insurance agencies.
Exchanges like Coin base provide insurance for their users with the Coin cover platform. You can have a quick look at your exchange or do a quick Google search by inputting “name of exchange” + “insurance”
CRYPTO INSURANCE FOR INDIVIDUALS
Most crypto insurance companies provide cover for exchanges because of the huge amounts of funds that are involved. Some companies provide crypto insurance for individuals but with specific conditions.
As I said earlier, Breach insurance is the first regulated insurance provider for personal crypto wallets. Using its Crypto Shield platform, it insures against hacks and exploitation within some crypto exchanges like Coin Base, Binance US, Gemini, and Coin list.
It’s a Boston-based company that spans over 10 States in the U.S. including New York, California, and Massachusetts. Crypto shield covers 20 cryptocurrencies like Bitcoin, Ethereum, and Dogecoin and does not cover third-party crypto wallets. It covers loss within the range of $2000 to $1 million and the policy amount can be deductible.
CRYPTO INSURANCE POLICY
Crypto insurance policies are meant to protect crypto users against cyber attacks and loss of crypto funds. These policies are different from regular insurance policies and have some irregularities because of the unpredictable nature of the crypto market.
Though crypto insurance protects users against the loss of their crypto tokens, there are some situations that they don’t cover, which include:
- Volatility: It does not cover the highly unpredictable crypto market which can have a price pump and deep in a few day’s interval. Cryptocurrencies unlike the traditional hard currencies in the stock exchange market which are relatively stable cannot be insured based on their volatility.
- Phishing scams: Crypto insurance policies also do not cover scams where you were actively involved in providing sensitive information about your wallet address or account. This could be in form of Ponzi schemes, spam emails, or social media ads.
- Loss of private key: Whenever you lose the key to your wallet, it is assumed that your crypto funds are lost forever and the insurance policies will not reimburse your lost funds.
- Third-party transactions: In the case of insurance coverage from crypto exchanges, they do not cover losses that are due to transferring crypto funds to another exchange or wallet.
- Hardware losses: It does not provide insurance for direct losses of hardware or cold wallets. It mainly protects against the theft of hardware or cold wallets.
- Failure in Blockchain underlying asset: They do not protect against losses due to errors in the structural make-up of crypto currencies.
THE FUTURE OF CRYPTO INSURANCE INDUSTRIESÂ
Crypto insurance is an emerging industry with lots of potential to develop but the underlying risks involved and complexities have resulted in a rather slow-paced growth.
Since the Lloyds of London first came into the game some other start-ups and insurance companies have joined the fray providing liability insurance that is commensurate with the ever-fluctuating crypto market.
However, it is difficult to estimate the exact amount of cryptocurrencies insured in hot and cold wallets to be able to measure the net worth of the industry.
In the overall scheme of things, you wouldn’t be wrong to expect rapid growth in the blockchain insurance industry soon. As the total cryptocurrency market cap as of Jan 9 2023 is $870.97 billion(statista)
Additionally, the global online payment market was worth $6.75 trillion in 2021(Research and markets) and this bodes well for the future of cryptocurrency insurance.
FINAL WORDS
With the persistent rate of cyber attacks and theft of cryptocurrencies, it’s only a matter of time before more people see the need to ensure cryptocurrencies. And more insurance companies can come to a compromise on crypto insurance policies that will fit into the controversial crypto space.
Cryptocurrency is a high-risk high reward investment and to safeguard your crypto tokens you must swerve away from spam emails, get-rich-quick schemes, and disclosing sensitive information about your wallet.
Now, I believe you’ve learned a lot about how crypto insurance works. Please I will love to hear from you, so don’t forget to leave your insightful thoughts in the comments section below.
     Written By Felix
Felix is a seasoned tech content writer who helps tech businesses break into new markets and reach a wider audience with high-quality writing solutions that generate leads and converts.I am a freelance writer for hire and you can check out my  Writing portfolio and connect with me via my social media profiles: LinkedIn and WhatsApp
