You’re probably familiar with insurance for your residence and your car and may have even bought it before traveling. But, if you’ve invested in Bitcoin or are an enthusiast thinking about doing that, the idea of Bitcoin insurance may not have crossed your mind yet.
It’s a relatively new concept, but there’s a growing need for Bitcoin insurance. Despite having a rough year in 2018, Bitcoin’s value has reached incredible heights. As the worth goes up — or the potential for substantial increase exists — and a growing number of merchants accept it for transactions, there are more opportunities for things to go wrong and cause people to lose their investments.
As a start, some hackers target cryptocurrency exchanges and orchestrate high-scale attacks that affect substantial segments of Bitcoin owners at once. Moreover, some cryptocurrency wallets are not as secure as they appear, and cybersecurity researchers have proved that through tests.
Even though Bitcoin insurance has not been around for very long, it bears a resemblance to traditional forms of coverage you already know.
For example, you should not buy it haphazardly and should always take care to understand the terms of a plan before finalizing your decision to purchase it. Here are five things to keep in mind that should help you make more confident decisions about Bitcoin insurance.
1. Coverage Is Not Consistent Across Companies
It’s necessary to learn what a Bitcoin insurance plan covers before selecting it. You cannot assume any option you choose will cover all or most conceivable Bitcoin-related mishaps. For example, some insurance only covers transactions, but most hacks happen after the fact.
Take the time to read the associated documentation carefully to find out which each plan gives you and whether a particular company you’re considering has more-extensive coverage than most.
Ideally, look for coverage that encompasses both the transactions and the storage of your Bitcoins. Pay attention to coverage limits, too. It’s especially important to do that if you already have substantial Bitcoin investments or are planning to ramp them up soon. Otherwise, you could have a false peace of mind that turns into a panic if your coverage is not as extensive as you thought.
2. Don’t Assume Your Homeowners’ Insurance Is Sufficient
You may think if you have homeowners’ insurance, there’s no need to get Bitcoin insurance, too. But, it’s premature to believe the insurance for your home extends to Bitcoin.
You may also be out of luck if a homeowners’ insurance company refuses to give coverage and you take legal action. Courts do not yet have an abundance of precedents to rely upon when making rulings about Bitcoin insurance. In one case that took place in an Ohio state court, a person with homeowners’ insurance made a claim related to Bitcoin.
The carrier determined Bitcoin was money and subject to a $200 coverage limit. But, that decision got overturned due to a conclusion by the court that Bitcoin was property and therefore covered more substantially under homeowners’ insurance.
Courts and insurance providers are still working out how to handle claims associated with Bitcoin. With that in mind, it’s best to get insurance for Bitcoin instead of thinking your cryptocurrency falls under the umbrella of coverage for your home.
3. Bitcoin Investing Success May Increase the Need for Insuring Bitcoin
Bitcoin “whales” are the relatively few entities that control about 40 percent of the market. With only about 1000 of them in the world, it’s not hard to imagine why criminals would specifically target them.
Many exceptionally successful Bitcoin investors live in anonymity or use pseudonyms to avoid becoming targets. Others don’t let their friends or family know how much their Bitcoin investments have paid off because spreading the knowledge seems risky. In February 2018, someone bought $400 million worth of Bitcoin, and their identity is still secret.
High-net-worth (HNW) individuals need specialized insurance coverage, due in part to the size of financial transactions they deal with regularly. If you’ve had incredible success with Bitcoin investing or are within the HNW category and have who decided to venture into the world of Bitcoin, those situations could warrant insuring your Bitcoin.
4. Bitcoin Insurance Could Help You Recover From Thefts
As mentioned earlier, Bitcoin wallet providers typically promote how secure their products are, but they are not without flaws. You don’t have to look for very long in the headlines to find articles about Bitcoin thefts. Even worse, what’s stolen reportedly only gets recovered 20 percent of the time.
Law enforcement officials and victims of cryptocurrency thefts also say such crimes often go unreported, sometimes because those who experience them are not sure which channels to go through to mention the issue. Then, the criminals feel emboldened to continue their illegal deeds.
Fortunately, more insurance providers are exploring offering theft coverage geared toward businesses that conduct transactions in Bitcoin and other cryptocurrencies. BitGo recently announced coverage of up to $100 million for the loss of business-based cryptocurrency wallets or keys.
5. You May Need to Ask Your Insurer Specifically About Bitcoin Insurance Coverage
Several insurers — including Lloyd’s of London — are quietly venturing into the Bitcoin coverage realm. That means you shouldn’t expect a lot of promotion and fanfare regarding a new coverage option from your existing provider.
If your insurer does not offer it already, there’s no harm in speaking up to mention you’d like to avail of it. Doing that could make the company realize the demand exists. Also, be aware that the number of companies offering Bitcoin insurance will likely grow if the early adopters discover the move pays off for them.
An Emerging Market
Insuring Bitcoin is still a niche product, but one that could be worthwhile, especially if you’re an HNW individual.
No matter what stage of the buying process you’re in, it’s crucial to study the details of all potential plans and learn about their benefits before choosing one.