What is cryptocurrency insurance?
Cryptocurrency insurance is exactly what you think it is. Insurance in case something happens to your cryptocurrency or NFT holdings.
With the growing number of scams and hacks in this space seeing bad actors get away with vast amounts of money, there's been an increase in the security and insurance providers as well.
At the time of writing, there are many different kinds of cryptocurrency insurance you could take out.
Some is automatically applied through the exchanges where you might store your currency. Other insurance has to be manually taken out and requires proof of your holdings.
Regardless of what type of insurance you take out, you should have at least some of your cryptocurrency secured in case of hacks or theft.
To add to the list of the best cryptocurrency insurance providers above, we've put together a couple of key points around crypto insurance.
Is cryptocurrency insured?
Generally speaking your cryptocurrency is not insured.
There are some caveats to this which we'll cover shortly. But as a general rule the crypto you're holding in your own cryptocurrency wallets right now will not be insured.
There is a slight caveat to this.
Some cryptocurrency exchanges have built in insurance in case they are the victim of an attack that steals currency. However, that doesn't extend to you.
For example, if the exchange is hacked and they lose currencies with a high value, they often have an insurance fund to cover these losses and make their users whole again.
However, if for some reason your private key or access to a site is shared due to your own negligence, the likelihood an exchange's insurance would cover your losses is very very low.
As a rule you should assume that your cryptocurrency is not insured and thus you should take as many steps as necessary to ensure your investments' security and safety.
Do I need cryptocurrency insurance?
This is really down to your own risk threshold and comfort level with your holdings.
For example, one person might be comfortable holding $5000 worth of investments and believe they need no insurance. Another person might start to get worried and anxious after they hit $500 in holdings.
Whether or not you need insurance for your crypto investments is completely dependent on you and your situation.
You can reduce the likelihood that your crypto is stolen by taking a few simple steps. We recommend ensuring that you get yourself a good cold wallet like a Ledger Nano X as soon as you hit the ~$1000 in investments.
A cold wallet will make it more difficult for someone to steal your cryptocurrencies and NFTs without your knowledge or authorisation. This should make you feel a little more relaxed when it comes to your own holdings.
If you still feel uncomfortable and want to guarantee you suffer no losses through theft, you might want to consider taking out insurance on your crypto in addition to using a cold wallet.
Do cryptocurrency exchanges offer insurance?
Some do. And you should really check whether or not the exchange you're looking at using has an insurance fund.
Many of the best cryptocurrency exchanges have some form of insurance fund set up to reimburse any user who lose assets due to weaknesses in the exchange itself.
However, as mentioned above, that insurance will likely not cover you if the assets are lost due to your own negligence.
We should also mention that cryptocurrency exchange insurance will only cover funds you lose that are being held in the wallets you find on an exchange itself. This is, generally speaking, not the best place for you to keep your assets.
An exchange is meant for exchanging or buying new cryptocurrencies, not for storing them.
If you're holding vast amounts of assets then you should look into getting a cold wallet to help you secure your assets. Without one, it's much easier for hackers to take your funds without you knowing.
Be sure to check if the crypto exchange you're using will assist you regain your funds should something happen that's out of your control.
What does good cryptocurrency insurance cover?
This is very dependent on the insurance provider and policy you take out.
However, as a general rule cryptocurrency insurance will only cover losses of your assets caused through theft.
That means if you lose your cold wallet and seed key, make a bad investment, or input the wrong crypto address when transferring funds you will not be able to get any back through your insurance.
Cryptocurrency insurance providers often won't cover losses caused by underlying issues with the blockchain being used for transaction.
How much does cryptocurrency insurance cost?
This is again heavily dependent on the crypto insurance provider and how much you're looking to insure.
Much like getting a car or home insurance, there are many different aspects used to judge the risk level associated with your assets.
That being said, it would be smart for you to shop around and ask multiple insurance providers for quotes. there is often a sizeable difference in the fees insurance companies will charge based on their own ability to asses and secure your assets.
Who provides the best crypto insurance?
Historically speaking cryptocurrencies have been too volatile and high risk for insurance companies to cover.
As a result, there are relatively few crypto insurance providers when compared to more established industries and assets.
The good news is that many leading insurance providers, banks, and crypto exchanges are slowly adding some level of crypto insurance policy into their offerings.
The key to finding the best crypto insurance provider is speaking to a number of the companies on the list above, getting a few quotes, and then choosing the provider who best meets your needs.