Crypto 101 What is crypto insurance and should you get one

As more people use crypto for sports betting, the industry continues to grow. Each year, more companies start to incorporate crypto into their system while people continue to use crypto as one of their preferred payment options. 

Since the crypto industry is also prone to hacks and fraudulent activities. This is one of the reasons why some investors are scared to invest in crypto.

To prevent scams and frauds, crypto insurance was introduced to the public to give investors peace of mind that their digital assets are protected and covered. If you are a new investor and wondering whether your crypto is insured, here’s a guide on how cryptocurrency insurance works and why you should get one:

What is crypto insurance?

Aside from crypto’s volatility, hackers often steal coins worth millions of dollars causing investors to lose assets which also affects the crypto industry. Due to this, crypto investors started to demand crypto insurance. Just like regular insurance, insurance cryptocurrency covers the same inflicted by uncertain events such as hacks and fraud. 

Since crypto insurance revolves around the same concept as regular insurance, users are given different types of insurance based on the policy they choose. Crypto insurance policies usually contain monthly premiums that must be paid to the insurance company. 

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How does crypto insurance work?

Crypto insurance is like a safeguard. For instance, in the event that your crypto is stolen, your insurance policy will cover any financial damages. If your hot wallets were stolen, you can get insurance money to replace the digital assets you lost. With the right crypto insurance, the damages done by fraud or hacking are highly reduced.

Since the crypto industry is not immune to theft and fraud, insurance crypto is offered by some companies to give punters a sense of security. Here are some crypto accidents or crimes covered by insurance for cryptocurrency:

• Theft or crime
• Hacking
• 51% attacks
• Lost keys
• Smart contract cover
   

Do crypto exchanges offer insurance?

The crypto trading platform on which you are storing your assets might offer insurance protection. However, access to insurance is not available on all exchange marketplaces. Each market has its own unique selection of insurance policies. Though some exchanges work with private commercial insurers, the majority stick to tried-and-true insurance policies.

The most widely used crypto exchange, Coinbase, carries a $225 million insurance policy. Meanwhile, Copper and BitGo are two of Bitstamp's wallet options that each have $300 million in cryptocurrency insurance coverage as standard. BlockFi, another crypto exchange, provides insurance coverage for its Gemini custodial wallet.

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Why is it important to get crypto insurance?

Investing in crypto is risky. Regular shifts and changes in the market might lessen the value of coins at any given time which can have a major impact on their pricing. Security threats, such as hacking and theft, can also affect crypto funds. 

Due to these risks, having crypto insurance that can protect and compensate you in an unexpected event is crucial. Not only does an insured crypto give you a piece of mind, but it can also help you recover any assets you’ve lost in case your digital wallet gets hacked or compromised. 

Risks that crypto companies face

Due to crypto's unique qualities, the primary threats faced by crypto businesses are those emerging like cyberattacks. Fraudsters can convince you that they are someone you can trust and that they need access to your account. Once hackers gain access, there’s no way to prevent them from taking your digital assets. 

To help crypto users and investors, insurance firms offer various policies and coverage that will safeguard assets from fraud and minimise the damage that unexpected events might cause.

Crypto insurance policies focus on industries

To get the most out of your insurance coverage, it's best to modify it to fit your situation or preference. When you apply for insurance, your insurance provider will ask what kind of wallet you use. This will give them an idea on which policy suits you. 

Here are three of the most common crypto insurance policies:

Errors and omissions

If you are looking for an exchange or wallet that offers crypto insurance, it is best to look for the errors and omissions (E&O) policy. Also known as professional liability, it mostly covers negligence, professional error and malpractice.  

Since most companies rely heavily on technology and coding, an error code that affected your assets will be covered by E&O. 

Commercial crime insurance

Commercial crime insurance is another type of coverage that is crucial to have. It protects you from financial loss due to crypto theft. If hot wallets were stolen, the crypto firm can replace your digital assets with the help of this insurance. 

Cyber liability insurance

It is the kind of insurance that will save you in case hackers gain access to your wallet. Cyber liability insurance will help you recover data and make up for the lost revenue. 

How much does crypto insurance cost?

Since crypto insurance is still a new concept, it is difficult to estimate how much crypto insurance actually costs. Also, the insurance cost depends on the company or exchange that is offering the insurance. The cost is also based on the type of policy you’re acquiring and how many crypto assets you have. 

There are also factors that can affect how much crypto insurance can cost. These are:

• Policy limits
• Type of insurance policy
• Cause of damage (fraud, hacking, or lost keys)
• Amount of crypto lost or stolen
   

If you are a crypto investor, it’s crucial that you consider choosing the best crypto insurance policy that meets your needs. With crypto insurance, rest assured that if your digital assets are stolen, they will be covered.

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Words by: Rica Miranda