Cryptocurrency insurance to protect your digital wallet against a cyber hack.
Why you need to consider insurance against unauthorised access to your digital wallet?
It is essential to protect your cryptocurrency assets when it comes to virtual currencies. There have been recent attacks on cryptocurrency exchanges, which have resulted in millions of dollars worth of stolen cryptocurrency funds. One of the ways you can protect yourself against these attacks is by purchasing cyber insurance with your digital assets. Besides the obvious loss of your cryptocurrency funds, there is also a chance that hackers could steal information that can be used to access your sensitive financial information. This is where cryptocurrency wallets come in, as they provide an independent and secure way of keeping your private information safe from outside tampering. Here we discuss how cyber insurance can assist in providing cover in the event of a security compromise such as email password phishing attacks.
What is cyber insurance for cryptocurrency?
Cryptocurrency insurance can protect you against any losses you suffer from theft, lost access or malicious attack of your cryptocurrency wallet. This cover is designed for money held in ‘hot wallets’ – crypto held online in accounts that remain connected to the internet.
It works just like any other personal insurance policy, and provides you with permanent protection and can offer a guaranteed payout if your cryptocurrency is stolen.
The value of any claim you make will be based on the amount of digital currency stolen and its fiat currency value at the time of theft based on an external valuation. Policies are open to personal and institutional investors, with cover limits available up to £100,000.
Why do you need crypto wallet insurance?
As the popularity of cryptocurrencies increases, so has the need for cover against theft by hackers. More and more investors are looking to cryptocurrency, but many have been put off by the risk of losses, and the lack of protection against it.
Most cryptocurrency platforms and wallet providers like Coinbase or Binance protect your digital currency by splitting it up into online ‘hot storage’ and offline ‘cold storage’. They tend to only hold enough currency in online storage to cover the liquidity needs of their customers, and all currency in hot storage should be insured.
However, this insurance won’t cover your own personal account or wallet. This means if your account is hacked or breached, the Coinbase insurance, for example, won’t pay out. This is why you need cryptocurrency wallet insurance.
It’s also important to remember that cryptocurrency isn’t backed or protected by any governing body or government, so any losses suffered won’t be protected in this way like other types of investment.
Cold storage vs hot storage
There are two types of storage you can use to store your cryptocurrency; hot wallets and cold wallets. Here’s how they work:
- Hot wallets: As mentioned, these are digital cryptocurrency wallets, and they come in two forms – online and desktop. They are the most common type of wallet because they are generally free, and easy to set up. Hot wallets are meant for everyday cryptocurrency users.
- Cold wallets: These are not connected to the internet, and are usually specially designed devices in which you can store your cryptocurrency. They can be expensive, and can only hold certain currencies, but they are considered more secure as they cannot be hacked.
Many people consider cold wallets to be the best and safest option because of the security they provide. However, if you have good cyber insurance for cryptocurrency policy, you can reduce the risk of using a hot wallet.
How hackers can access digital wallets
It’s important to remember that bitcoin itself is very difficult to hack, mainly thanks to the blockchain technology which supports it. As blockchain is constantly being reviewed by bitcoin users, hacks are unlikely.
However, hacking and malicious theft does still happen. Bitcoin and cryptocurrency users are assigned private keys, which let you access your currency, and hackers are able to infiltrate your wallet and steal your cryptocurrency if they know your private key.
Another risk is the two-factor authentication used as part of the transaction process. This means if hackers can get hold of your personal information they can gain access to your wallet.
Although huge efforts are made to make bitcoin as safe as possible, determined hackers will always find ways to get around developer’s security.
Using a hard wallet to protect your cryptocurrency in addition to cyber insurance.
As a bitcoin user, you should have a well protected and insured bitcoin wallet. The best option to prevent cyber theft of your bitcoin private keys is the use of a hardware wallet. Hardware wallets have been in development for more than 10 years in order to secure private keys in a hardware environment. Today we will discuss the advantages and disadvantages of hardware wallets as well as providing some popular options to protect your wallets and increase your security.
Cyber Insurance for Cryptocurrency FAQs
What is cyber insurance for cryptocurrency?
Cryptocurrency theft cover is an annual plan that protects you against the theft of your cryptocurrency held in an approved wallet. It offers a fiat currency equivalent payment of the cryptocurrency value at the time and date of theft.
What does cyber insurance for cryptocurrency cover?
It will protect you against all theft and loss of cryptocurrency funds resulting from proven third-party hacks or theft of private keys including brute force attacks, cyber attacks, phishing software, malicious software, trojans, worms, hacking, device theft, insider attack, and criminal extortion. It can also cover you for the loss of your crypto wallet keys.
What does cyber insurance for cryptocurrency not cover?
Only digital currencies held in approved wallets are currently covered by bitcoin insurance. Exclusions for approved wallets include; willful sending of digital currency by you or someone authorised by you and failure of a digital currency blockchain.
Which cryptocurrencies can be protected?
Cryptocurrency insurance can protect most currencies including:
– Bitcoin Cash
– Bitcoin SV
– XRP (Ripple)
Who is cyber insurance for cryptocurrency designed for?
Cryptocurrency cyber insurance is designed for people using cryptocurrency who wish to protect their assets from theft. It is available to adults over 18 years of age. You’ll be eligible to purchase cryptocurrency insurance provided you can demonstrate ownership of your assets.