Cryptocurrency, blockchain technology, and digital assets have a lot of potential, but they also have some risks associated with them that you need to understand in order to protect yourself and your investments. To help you navigate the cryptocurrency space, here are five things you need to know about cryptocurrency insurance.
5 Things You Need to Know About Cryptocurrency Insurance
1) The difference between standard property and theft coverage
Standard property and theft insurance policies don’t cover cryptocurrency because it’s considered a high-risk investment. That’s where cryptocurrency insurance comes in. Cryptocurrency insurance is designed to protect your digital assets in the event of theft, hacking, or other loss. Here are five things you need to know about this type of coverage:
- It covers all cryptocurrencies – even those not listed on exchanges
- It pays out as cash – not coins
- It won’t cover if you’re hacked by someone with physical access to your device
- Unlike standard insurance, there’s no deductible
- Policies can range from $50k-$500k worth of coverage
2) Who Should Buy This Coverage?
If you own cryptocurrency, or are thinking about buying some, you may be wondering if you need insurance. The answer is: it depends. An important thing to consider about crypto insurance before making a decision is how much crypto do you have? If you have more than $1 million in cryptocurrencies and it isn’t stored offline, then getting coverage is wise. You may also need to think about who has your private keys. If someone else has your private keys, then they can make transactions with your coins without your permission (and there’s no way for you to reverse the transaction). That means that whoever has your private keys could steal your coins or spend them on something else. So it would be wise to get insurance. Just make sure to get your insurance from one of the best crypto insurance companies so that you get maximum protection.
3) What Is Covered Under Crypto Insurance?
Cryptocurrency insurance policies cover funds held in online wallets and exchanges, as well as offline cold storage wallets. Coverage includes loss of digital currency due to hacking, fraud, and other cyber-related crimes. Physical damage to hardware wallets is also typically covered. What Isn’t Covered Under Crypto Insurance? Most cryptocurrency insurance policies exclude losses due to price fluctuations or changes in the value of the underlying asset. So, if you buy a policy when Bitcoin is worth $10,000 and the price falls to $8,000 before you make a claim, you’ll only be reimbursed for $8,000 worth of Bitcoin. There are some exceptions to this rule, but they’re few and far between.
4) Who Pays for Crypto Insurance?
Crypto insurance is still a new industry, which means that there are a lot of unknowns. For example, it’s not clear who will pay for cryptocurrency insurance. Will it be the exchanges, the wallets, or the users? Right now, it’s likely that the exchanges will foot the bill, but this could change in the future.
5) Do Insurers Cover Tax Liabilities?
If you’re holding cryptocurrency as an investment, you may be wondering if your insurance policy will cover any potential tax liabilities. The answer is, unfortunately, no. While some insurers are beginning to offer coverage for cryptocurrency-related losses, none of them currently cover tax liabilities. So if you’re holding cryptocurrency, be sure to set aside some money to cover any potential taxes you may owe. If you’re considering investing in cryptocurrency, however, there’s a little more hope. A few major insurance companies have begun to cover crypto-related losses, but again with the exclusion of taxes.