Are You Looking For Insurance In The Cryptocurrency Market?

Table of content

• Why Do I Need Crypto Insurance In The Cryptocurrency World?
• An Invaluable Source of Revenue
• Two Types of Top Crypto Insurance Programs For Firms And Corporations
• Bitcoin Is a Commodity: Should You Get Commercial Insurance?
• Do Exchanges Provide Security For Cryptocurrency?
• Can I Insure My Bitcoin?
• Does Homeowners Insurance Cover Bitcoin And Other Cryptocurrencies?

Given the volatility of cryptocurrency markets, crypto insurance becomes crucial. The rapid appreciation of Bitcoin and other cryptocurrencies has resulted in significant thefts of online wallets and exchanges. The theft of $500 million worth of cryptocurrency from the Japanese business Coincheck in January 2018 highlights the vulnerabilities of the mainstream financial system.

Let's examine the example of BitGo, a blockchain security firm. In 2015, the company announced its insurance coverage provided by XL Group. Regrettably, a blog post was inadvertently deleted and restored during this incident, falsely alleging that Bitfinex's involvement in a hack resulted in losses exceeding $70 million in virtual currency.

With the ever-changing landscape of Bitcoin and other cryptocurrencies, insurance companies need help to charge accurate premiums.

Cryptocurrency data is not available. Because valuation volatility, which can produce triple-digit price fluctuations, diminishes the number of coins protected, premiums may be impacted. Because of cryptocurrency's recent price fluctuations, the industry remains highly volatile. It has erased some of the previous optimism surrounding cryptocurrency in general and blockchain technology more specifically.

The massive increase in Bitcoin prices during the past 365 days may have caused some investors to be hesitant. Other nations are now thinking of ways to control virtual currencies and blockchains, which could obstruct certain companies wishing to do business there.

Many insurance companies have studied Bitcoin for a few years now. In 2015, Lloyd's published a report discussing the various risks associated with cryptocurrency. “The development of worldwide security standards for both cold (offline) and hot (online)bitcoin storage would help reduce risk and give insurers,” it said. The company also proposed server-side security, offline storage, and multi-signature technology as possible methods to mitigate these dangers.

Why does the cryptocurrency ecosystem need insurance?

On the other hand, cryptocurrency market problems may provide an income source for insurance companies. Most sector-aimed insurance solutions are bespoke goods that fit each client's needs.

Theft insurance is popular among startups and businesses in the cryptocurrency sector, according to a Bloomberg report. On the other hand, insurance should cover claims arising from hacks. The study suggests that startups must pay a maximum of 5% of their coverage limits. Burglary insurance costs can be daunting at up to $10 million annually. Thankfully, coverage is spread among many underwriters from $5 -$15 million each so that no one insurer bears the full brunt of their investment in this service.

Insurance firms have devised innovative methods to calculate premiums to take advantage of this chance. AIG's head of North American cyber insurance, Christopher Lin, likened the crypto business to a digital armored car service. He said he has taken on the approach of looking for established companies without similar risk profiles.

Below are several sorts of insurance to consider for protecting your company's Bitcoin holdings, whether you're a small or big business.

Cryptocurrency must be securely held in a digital asset wallet, exchanged on an exchange platform, or stored via another online service. Custodial insurance can help you save the day if you lose access to your crypto assets (for example, losing control of your crypto keys or the firm running your business goes bankrupt).

Because Bitcoin is decentralized, it takes a lot of work to reverse or delete an account. The Bitcoin Foundation estimates that around 20% of all bitcoins are lost or trapped in wallets with unknown passwords (1). It adds up to investors losing a cumulative total of approximately $185 billion as of May 2021. Once these bitcoins are spent, they become irretrievable.

Cryptocurrency custodial insurance can be costly, but it might protect your company from losing access to its bitcoins and other digital currency for good.

If someone commits a theft or robbery, business insurance (crime insurance) can cover claims for losing money, assets, and inventory. The cryptocurrency market is one example where this type of coverage would be beneficial.

Regrettably, criminal activity is rampant in the cryptocurrency market, and businesses too often overlook how crucial it is to have a protocol for dealing with it. Does insurance cover crypto?

Purchasing the appropriate insurance policy protects your firm and its digital assets from crime and theft. An expert commercial insurance broker may

Digital business assets and cryptocurrency portfolios are covered by several standard business insurance lines, such as directors and officers (D&O) and errors and omissions (E&O) insurance, also known as professional liability insurance.

These coverages are becoming more difficult for organizations to obtain, but they are still critical; as a result, finding an insured broker with considerable expertise is increasingly essential.

Defi for Cryptocurrency: Decentralized Finance Insurance (DeFi)

Competent contract insurance is a form of decentralized network infrastructure protection (DNP) that protects smart contracts. Intelligent contracts are algorithms stored in a blockchain activated when certain conditions are meting, which makes them similar to conventional software programs. By removing the need for intermediaries, intelligent contracts can expedite transactions and make them more secure while providing visibility into the entire process. It ensures agreements are executed efficiently without any delays or complications.

A cryptocurrency protection policy from a reliable provider will ensure that the currency's software is unhackable and that trades are carried out seamlessly according to the smart contract's conditions.

Although this policy may seem less essential, you must protect your company's digital financial assets against hackers.

You may also be covered by the crypto exchange you use. O'Connell claims that one of the most sought-after cryptocurrency exchanges in America, Coinbase, has an impressive $255 million crime insurance policy.

Coinbase's insurance policy becomes active in the event of a hack targeting the Coinbase platform. Unfortunately, if a hacker breaches your account and steals away your digital currency, Coinbase's insurance cannot offer you any reparation. Furthermore, there is no guarantee that in an extensive system hack where the entire platform is compromised – all of your funds will be retrievable. According to Coinbase's website policies: “If the whole loss…exceeds the insurance compensation…your cash may still be missing.

With an astonishing $2 billion traded daily, this Bitcoin exchange is the biggest in market capitalization. The biggest digital currency exchange in terms of trading volume is CoinBase, which brought some stability to the market when integrated with licensed broker comparisons. However, compared to its competitors like Gemini and Binance, BitStamp's services are somewhat less appealing.

Most crypto-exchange companies, such as Gemini and Bitstamp, are safeguarded with insurance protection against illicit activities. The company's main Gemini custodial wallet protects BlockFi from theft.

Crypto.com maintains insurance coverage for digital assets held in cold storage. The insurance policy is designed to protect against physical damage or destruction, as well as third-party theft.

Bitfinex has implemented several security measures and maintains insurance for assets stored in cold wallets. The insurance is designed to protect against losses due to hacking and other security breaches.

Nexo offers insurance coverage for digital assets held in their custody. This insurance is provided through partnerships with third-party custodians, ensuring protection against various risks.

Binance.US, another well-known exchange, and FTX, a lesser-known but popular site, have yet to respond to questions.

Although cryptocurrency may be insured, it is essential to recognize that traditional insurance policies (homeowners insurance) cannot protect you from digital currency theft. Also, property damage and crime policies might cover losses from crypto insurance and try to exclude relatively new or volatile assets (we'll get into more detail on this later). However, as the popularity of cryptocurrencies grows, new companies are popping up that specifically offer protection solutions.

Insurers work with cryptocurrency exchanges to develop policies that benefit both sides. Bitbuy, a Canadian bitcoin exchange, recently collaborated with insurer Knox to create a comprehensive insurance policy. The coverage includes the risk of coin theft, loss, and hacker or employee betrayal.

One example of a cryptocurrency platform insurance its customers' assets is Bitbuy. There's no question that other platforms provide the same level of protection for digital cash. Insurers can use cold and hot storage solutions to safeguard coins, lowering everyone's risks.

For instance, we will work with you to find the best way to ensure your holdings.

Some companies that insure digital assets are:

• Bitbuy
• Gemini
• Bitstamp
• Coinbase
• Binance.US
• FTX
• Kase
• Crypto.com
• Bitfinex
• Nexo

Insurance coverage is undoubtedly wise, yet it only sometimes guarantees that you will be able to regain the same amount of assets you lost due to a cyber attack. It underscores the importance of recalling that your losses could accumulate even with an insurance policy. Additionally, recovering every asset may become impossible if there's a security breach scenario of worst-case proportions.

If you have cryptocurrencies, your regular homeowner's insurance policy will not cover them in the event of theft or loss. Look into an insured currency platform or cryptocurrency-specific insurance policy to protect your digital assets. For example, say you mine Bitcoin and store it on a hard drive. If someone breaks into your house and steals the hard drive containing your Bitcoin holdings, standard homeowners insurance won't reimburse you for the value of those lost funds.

Suppose you have a comprehensive homeowners insurance policy that includes off-premises coverage. In that case, your insurer may cover any loss or theft of cryptocurrency while it is away from the safety of your home. Imagine the unfortunate circumstance of attending a Bitcoin conference and having your laptop stolen from your hotel room. If your homeowner's insurance covers this loss, filing an insurance claim may be possible.

Take time locating suitable insurance for your cryptocurrency; it depends on how you preserve your digital assets and what kind of coverage you want. Do some research, and soon enough, you'll find an ideal plan that fulfills your needs.