What is Crypto Insurance and Do You Need It?

Published on 7/27/2022 by Bar List Publishing

Cryptocurrency coins

Insurance is one of those things that everyone grumbles about paying for, but then when it is really needed, we are all grateful that we have it. There are many things that we can opt to insure such as jewelry and art, but there are other things that we are required to insure like cars and homes. Crypto insurance is one of those optional things that people do not always think about, but that can be very helpful when you need to recoup your losses.

Cryptocurrency is soaring in popularity right now, but theft of crypto funds has increased at the same rate. Forbes reported recently that 0.62% of the activity in the crypto world is from crime, which is almost double the numbers reported in 2020. Protecting your crypto has never been more important and most people would be considered foolish for not having crypto insurance in place to protect their investment.

What is Crypto Insurance?

Crypto insurance protects against losses that are associated with cybersecurity breaches. The exchanges that you buy crypto through are supposed to be protected against these incursions, but data theft and cyber breaches are being done in increasingly sophisticated ways these days. It has never been more important not to believe a website when they say that they will protect your assets 100% as no company can really promise you that.

Crypto insurance is primarily used to protect a portion of your investment from theft. There might be other kinds of protections that are offered within your policy as well, but you will likely be most interested in the theft aspect of the policy. This is a lot like the insurance that backs funds that are held by banks or credit unions in the US, but it is used instead to protect your crypto.

Why Do I Need Crypto Insurance?

The biggest reason that you need crypto insurance is to protect your investment against theft. No matter how secure your exchange is, you might find that they are not able to fend off the kinds of sophisticated attacks that get through the protections that the site has in place. When you have a lot of crypto that you own, you should not assume that the site or exchange that you are working with will be able to keep your assets safe.

Unlike actual money, your crypto cannot be brought out into the real world and stored under your mattress. While this is not even advisable with real money, there are no added securities with crypto when you do not have crypto insurance in place to protect it. There are some other best practices that you can add to the mix along with your crypto insurance to help secure your investment, and you should be doing all of these things.

The crypto insurer that you work with might also cover brokerage accounts, which can provide a double layer of protection for your benefit. You will want to do some research as you are looking into your crypto insurance options to make sure that the policy that you are picking is appropriate for your investment goals and needs.

Another factor that is in play today is that many of the larger cryptos are poised to falter. If you have lots of money invested in these exchanges or currency types, you could lose everything without crypto insurance backing your assets. This will help you deal with potential delays or denials of repayment that others will have to grapple with if they are not insured.

Some Ways to Back Up Your Insurance

While your insurance will reimburse you for a large portion of your investment, you should also be using some best practices to help keep your investment safe. In fact, if you are not using some of these tips, you might not be able to secure insurance for your crypto even if you want it.

Use a Wallet

Having a crypto wallet makes your crypto much harder to hack. You will be able to control your crypto through the use of public and private keys and you will not have to leave your crypto on the public market where it can be lost. Hot wallets are connected to the internet and cold wallets are not.

Use a Quality Exchange

This is one of the things that you should be doing no matter what, but it will help you out if something happens and your crypto is stolen. A quality exchange is supposed to be ultra-secure, and if your crypto is lost on this kind of exchange, there will be no questions asked about the theft related to your claim.

Be Safe Online

This is one of the things that we think we are doing every day but that we often do not do in practice. Be sure to use complex passwords and make sure that your computer has good malware. You do not want to be the reason for your own downfall, and the riskier your behavior online, the more likely it is that you will have to deal with lost crypto.

Crypto Insurance Is Essential if You Own Crypto

If you have been worried about the state of the crypto reality recently, there is no time like the present to get crypto insurance to protect your investment. The risk of faltering crypto types and the increasing issues with theft of even well-known exchanges makes this essential for those who own crypto that they want to protect. Be sure that you are using your own best practices such as cold wallets, secure internet, and quality exchanges to help protect your investment as well.

Just like insurance for your home or your car, insurance for your crypto should be considered mandatory. These assets might be digital but they represent a big investment on your part and you do not want to lose the money that you have wrapped up in your digital currencies. Having crypto insurance in place for your investments can make all the difference for your investment as you navigate the increasingly complex crypto reality.