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5 Best Blockchain & Crypto Insurance for 2022

Cryptocurrencies and the blockchains they’re based on are hot commodity right now. People have heard you can make millions practically overnight by investing in cryptocurrency. Since cryptocurrency is exchanging currency without a bank, there are many risks involved in the cryptocurrency business space. Cryptocurrency insurance is in its infancy, but it has the potential to become a major player. 

Here are five companies that are offering insurance to cryptocurrency companies. 

Lloyds of London

Lloyds of London was the first company to offer cryptocurrency insurance in 2019. It’s a liability policy and you can insure as little as £1,000 (about $1,350 U.S. dollars). It protects cryptocurrency from theft due to hacking. Since cryptocurrency is so volatile, the policy has a dynamic limit that increases or decreases depending on the valuation of the assets. 

Coincover

Coinover offers insurance to protect cryptocurrency from hackers and human error. Coincover was founded in 2018 and currently insures over 200 crypto companies. They offer disaster recovery and theft protection. This means that if someone hacks into your company and steals your customer’s crypto assets, you’ll be protected. 

They even provide personal crypto insurance, which protects consumers from hackers and from being locked out of their own wallets. To be clear, you are not being insured from losing money to crypto: you are being insured against theft and loss of access only. If your crypto takes a dive and loses 50% of its value, you’re on your own. It’s just like investing in the stock market, except more volatile. 

Embroker

Embroker is a fintech company that specializes in insuring small businesses and startups. They offer several policies for crypto exchanges, including:

  • Directors & Officers
  • Errors & Omissions
  • Cyber
  • Crime
  • Specie
  • General liability
  • Workers’ compensation

And they list “proprietary products upon request.” Embroker says that they have experts who understand the risks of a blockchain or cryptocurrency business and can help you build a custom policy. 

Superscript

Like Lloyds of London, Superscript is based in the U.K. They offer the following types of insurance for your burgeoning cryptocurrency business:

  • Errors and Omissions (E&O): E&O insurance protects you from allegations that your actions caused a third party to suffer a financial loss, whether due to poor advice or to technology service errors. It could cover things like software errors, negligence, unintentional copyright infringement, or breach of contract. Learn more at the best E&O insurance companies
  • Cyber: Cyber insurance covers hacking of your data, ransomware attacks, cyber business interruption, and denial of service. Any business that deals in digital assets or personal information needs cyber insurance, but particularly cryptocurrency businesses because digital assets are your entire business. It does not cover hacking of private keys, however. Learn more at the best cyber insurance companies
  • Directors and Officers (D&O): similar to E&O except it covers your officers and directors against personal losses for the decisions they make on behalf of the company. Learn more at D&O insurance cost and the best D&O insurance companies
  • Crime/Specie: Protection of personal keys against hacking and theft. Covers both hot and cold wallets, although hot wallets are more expensive to insure due to higher risk. 

Even though Superscript is based in the U.K. they know cryptocurrency holders and buyers are located everywhere, so they can cover your business wherever it’s based. In addition to these policies, they plan to expand into custodianship and crypto mining. 

AON 

Aon was one of the first insurance companies to offer insurance for cryptocurrency cold storage. Now they are shooting to enter the decentralized finance space (DeFi). When and if they get to it is really here nor there: right now they offer flexible policies for digital assets and cryptocurrency. They can insure banks, brokerages, miners, and emerging blockchain companies. 

Is cryptocurrency backed by the U.S. Government?

No. There is no backup or FDIC insurance for cryptocurrency assets. Therefore many insurance companies are hesitant to offer any type of policy on cryptocurrency: it’s extremely difficult to assess the risks. Cryptocurrency wasn’t specifically invented for hackers, but it appeals to them because of the lack of federal oversight and regulation. 

The good news is that cryptocurrency may one day be covered by the FDIC. This would mean the assets you hold in your crypto wallet would be as secure as the assets you hold in your bank account. However, the FDIC could take years to decide to cover crypto, or they may decide not to cover it at all. 

What kind of insurance can my cryptocurrency business get?

Exchanges and crypto wallet companies can purchase some types of business insurance: crime and theft are the most common. There is also custody insurance. Since crypto needs to be stored somewhere, you either need crypto keys or an exchange. If you lose your crypto keys or if the exchange goes out of business, custody insurance would help you recover your assets. This is more important than you think: it’s estimated that 20% of cryptocurrency is either lost or stranded somewhere. 

Custody insurance should include key storage, key recovery, and disaster recovery so that you don’t lose access to your digital currency. 

You can also buy whatever business insurance you think you might need, such as Errors & Omissions insurance and Directors & Officers insurance. 

Why don’t more insurance companies offer cryptocurrency insurance?

One word: risk. Cryptocurrency is extremely attractive to thieves and hackers because it’s hard to trace. Therefore, the insurance industry stands to lose money on theft insurance for cryptocurrency and blockchain technology. In 2021, hackers stole $14 billion dollars’ worth of cryptocurrency. 

Another reason that insurance companies are hesitant to provide insurance is that rates are usually based on historical data, and since cryptocurrency is still new, there isn’t much historical data. 

On the other hand, since every step of a blockchain is recorded and rests on the piece of the chain that came before it, financial authorities are becoming more successful at investigating illegal activity. 

Also, cryptocurrency insurance is starting to become in demand, and as demand increases, more insurance companies will look into offering this insurance. This might help pave the way for mainstream acceptance of cryptocurrency. Currently, about 34 million U.S. adults own cryptocurrency. Adult men ages 18 to 49 are the most likely demographic to have tried their hand at cryptocurrency investing. 

Last thoughts

Cryptocurrency companies are like any other small business: they need insurance. Cryptocurrency insurance is poised to become the next big thing in the insurance industry as more and more companies are considering moving into this space. Options are expanding at an exponential rate. 

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