Is Cryptocurrency Insured?

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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Insurance gives your assets extra protection. It’s the reason why financial institutions are FDIC-insured. If your bank loses its money, the Federal Deposit Insurance Corporation steps in and replenishes every bank account holder’s money, up to the first $250,000. Knowing your money is safe results in peace of mind, but what about your crypto? We have heard horror stories about people losing access to their fortunes and hackers stealing crypto. Virtual currencies are not insured on their own, but some companies offer insurance. Partnering with a crypto-insurance broker will add an extra layer of security to your digital assets.

Invest In Crypto for Retirement

What is Cryptocurrency Insurance?

Cryptocurrency insurance is a premium you pay to keep your crypto safe. With cyberattacks on the rise and hackers eagerly trying to get into digital wallets, crypto insurance is gaining momentum. Bitcoin insurance policies can get complicated and expensive since the asset is volatile, vulnerable, and has fewer legal regulations. Nevertheless, companies like iTrustCapital partner with institutional crypto wallet providers that insure the crypto being held by every client on the platform, for no additional charge to the investor.

How Does Cryptocurrency Insurance Work?

Cryptocurrency insurance increases your monthly expenses, but it can save you a lot of money if a hacker steals your crypto. You can approach an insurer and have them replenish your crypto during this scenario. The insurance company will charge higher premiums if a hacker takes your crypto, but you get a crypto portfolio reset. It’s a useful feature for any crypto investor, especially people planning for retirement.

Crypto insurance varies significantly across each insurance company. It’s a new industry for investors and insurers, but a crypto insurance policy will not cover everything. Most insurance companies do not provide coverage for the following scenarios:

  • The cryptocurrency’s blockchain fails or gets disrupted
  • Crypto transfers to third parties
  • Losing or damaging crypto hardware

If you have questions about specific insurance coverage, ask the insurance company or the broker with the insurance policy.

Who Typically Insures Your Cryptocurrency?

Cryptocurrency insurance policies are complicated, and not everyone can insure their crypto. Most insurance companies work with crypto exchanges and brokers to insure crypto. Brokers and exchanges have deeper pockets which give them greater flexibility on coverage choices. You can insure your crypto by keeping it with a broker or exchange that insures its crypto assets. 

Reasons to Insure Your Cryptocurrency

Many people buy insured assets or look for insurance policies to feel safer. We can hope for the best while preparing for the worst. A Bitcoin insurance policy prepares you for the worst and reduces your downside. You won’t receive protection if crypto enters a correction, but you’ll reclaim your funds if a hacker steals crypto. The extra protection isn’t the only reason people are rushing to insure their crypto.

Increased Adoption of Cryptocurrency

People often insure valuable assets that can go up in value or cost a lot of money to replace. It’s the reason people insure their homes, cars, and other resources. It’s also why people don’t insure knick-knacks and other items they can live without. The increased adoption of cryptocurrency suggests crypto’s demand will continue rising in the future. 

Crypto’s decentralized blockchain structure addresses flaws with fiat currency. Cryptocurrencies do not have central authorities that can manipulate the money supply, and you can avoid middleman fees when transferring crypto funds overseas. Investors want more control over their money, and some believe crypto is the solution.

Regulation

Regulation for crypto is loose and more complex than fiat currency. Fiat currencies have FDIC insurance and other protections in place. With less regulation in crypto, an insurance policy provides some solace. It sets rules on how your crypto gets protected and replenished in the event a hacker steals your funds. Governments are getting more involved with crypto, which can reduce risk in the future. However, investors must navigate current market conditions. Insurance policies add certainty in an uncertain world.

Invest In Crypto for Retirement

Surge in Decentralized Finance (DeFi) Products

DeFi enables users to exchange assets securely with peers on public blockchains. Smart contracts eliminate the need for a middleman, helping both parties save on fees. You also don’t have to trust a third party to complete the transaction smoothly. Decentralized finance gives users more control over their money. Cryptocurrencies use DeFi technology to facilitate transactions, and growing demand in this space will translate into more demand for digital currencies.

Financial institutions are investing in DeFi to stay up to date on this booming industry. With the U.S. dollar losing value from inflation, more people are turning to DeFi for a viable alternative. DeFi also lets you lend crypto at high-interest rates. You can turn your crypto into an income source. Crypto’s increasing functionality makes it a more desirable target for hackers. A crypto insurance policy lets you focus on buying crypto while the insurance company takes care of you if the worst-case scenario happens.

Rise in Bitcoin’s Value

Bitcoin is a volatile cryptocurrency that has featured many dramatic price swings. Although crypto is more than 50% off its highs, Bitcoin is no stranger to these declines. However, cryptocurrencies have bounced back each time and have rewarded long-term investors. Because of this volatility, many investors only allocate a small percentage of funds to Bitcoin. Hackers will get more interested in Bitcoin as its valuation rises. Some hackers target altcoins that have more room to run than Bitcoin.

People already protect high-value assets, such as their cars and homes. Your money is federally protected, but the same assurances are not in place for crypto. Joining forces with a broker or cryptocurrency exchange that offers crypto-insurance will keep your assets safe. You won’t get protected if Bitcoin crashes or enters a correction, but a policy lets you recover from cryptocurrency theft.

Increase in the Number of Transactions

Every asset’s value revolves around supply and demand. More transactions demonstrate a rising demand for crypto as investors seek to escape inflating fiat currencies. Higher demand can eventually result in higher insurance premiums. Getting a fixed rate policy helps you lock in premium payments before they increase.  

Use a Platform Where Your Cryptocurrency is Insured

Insuring your crypto keeps your money safe from hackers and other instances. In addition, some insurance policies provide coverage for people who lose their digital keys and can’t access their crypto. You should check with each insurance company to see what’s covered on the plan.

Unfortunately, most crypto insurers will not work with individual customers. You can use cold storage to keep your crypto off the grid, it takes time and money to insure crypto, and if you make one mistake, a hacker can get your crypto. The government does not insure crypto, leaving you with a significant loss in the worst-case scenario.

A platform with a cryptocurrency insurance policy offers superior protection for your crypto. These platforms use cold storage and other protocols to minimize security breaches and keep hackers out of crypto wallets. However, they also take it a step further and invest in the policy. As a result, cryptocurrency brokers and exchanges can afford the high premiums and make you more confident in your Bitcoin investments

If you want your crypto insured, you can invest with a company like iTrustCapital. iTrustCapital has a crypto insurance policy and provides crypto IRA accounts. You can get tax advantages from an IRA and save on your capital gains. You can visit iTrustCapital’s website to create an account and open a crypto IRA.

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