Navigating the Complex Landscape of Cryptocurrency Insurance: Costs, Coverage, and Prevention Strategies

Cryptocurrency insurance, covering assets such as Bitcoin, Ethereum, and other digital currencies, has become increasingly sought after. With the surge in crypto theft incidents, investors are exploring options to secure their holdings and mitigate potential financial losses. Unlike traditional financial systems with regulatory safeguards, cryptocurrencies lack federal protection, posing a challenge for insurers to underwrite policies. Consequently, there are limited choices for cryptocurrency insurance.

Where to Find Cryptocurrency Insurance?

Locating cryptocurrency insurance is a complex task. A search for "crypto insurance" yields diverse results, ranging from market speculations to platforms offering theft prevention technology, such as Coincover's Business Cryptocurrency Theft Protection, which is not traditional crypto insurance.

Securing insurance proves challenging due to the scarcity of options. For individuals, Breach Insurance offers protection against crypto theft resulting from exchange wallet hacks, albeit with limitations on supported currencies and availability restricted to specific U.S. states.

Businesses face similar challenges in safeguarding their digital asset platforms. This raises the question: if insuring cryptocurrency is challenging, should the focus shift to preventive solutions rather than curative ones? Emphasizing crime and theft prevention may be a more effective strategy.

What's the Cost of Cryptocurrency Insurance?

Several factors influence the cost of cryptocurrency insurance and its insurability:

Regulatory Oversight: The absence of regulatory oversight and standardized security measures complicates risk assessment, potentially leading to higher insurance costs.
Security Standards: Differing security standards for hot and cold storage further contribute to the complexity, making it challenging for insurers to evaluate risks.

Research suggests that individual crypto insurance could cost approximately 2.5% of the investment. For instance, insuring $100,000 worth of crypto might incur a cost of $2,454. However, this cost is notably higher than utilizing theft protection technology to prevent theft initially.

Is Crypto Covered by Exchanges or Wallet Providers?

Many crypto investors rely on insurance provided by exchanges or wallet providers. However, these coverages have limitations. In cases like the 2018 Binance hack, where over $400 million was stolen, the insurance only facilitated partial refunds to affected customers.

Business-held insurance often extends to companywide breaches, excluding theft from individual accounts. Coinbase's policy, for instance, explicitly excludes losses resulting from unauthorized access due to a breach or credential loss.

Some well-known crypto providers offering insurance coverage include BitGo, Gemini, Coinbase, Robinhood, and Crypto.com. However, coverage specifics and limitations vary.

Do You Need Crypto Insurance?

Unlike traditional financial systems with protections like FDIC in the U.S. or Financial Services Compensation Scheme in the UK, cryptocurrencies lack regulatory guarantees. Cryptocurrency theft poses a significant risk, with no assurance of recovery if assets are stolen. While insurance offers a potential solution, it's scarce and costly.

The alternative lies in prevention. Coincover's theft protection technology analyzes transactions for malicious activity, providing alerts before broadcasting to the blockchain, thus preventing theft. Coincover has insured its technology, enhancing the commitment to compensating users if the technology fails to prevent loss.

In summary, while insurance is an option for reclaiming stolen crypto assets, its scarcity and cost compel a reconsideration of preventive solutions. Emphasizing theft prevention technology, like Coincover's, emerges as a proactive and potentially more effective strategy.