Crypto Insurance: What is Actually Covered?
The Executive Verdict
Introduction: The "Insured" Marketing Trap
The word "Insured" is a false safety net. In Web3, insurance protects the Custodian, not you. Most policies have massive exclusions. This guide reveals the "Invisible Gaps."
1. The FDIC Myth: Why the Government Isn't Coming
Your USD in a bank is FDIC insured ($250k). Your USDC/BTC is NOT. In bankruptcy (e.g., FTX), you are an unsecured creditor. Regulators will not bail you out.
2. Specie Insurance: Protecting the "Cold" Assets
Covers: Physical theft, Natural Disasters, Internal Collusion. Excludes: Hacks of Hot Wallets, User Errors, Price Volatility.
A diagram of a Bank Vault. Inside the vault (Cold Storage) is a green "Insured" checkmark. Outside the vault, at the teller window (Hot Wallet/API), is a red "Uninsured" X.
3. Cyber & Crime Policies: The "Phishing" Gap
The dangerous "Voluntary Transfer" exclusion: If an employee signs a transaction (even if tricked), the insurer calls it "voluntary" and denies the claim. Ensure your policy covers Social Engineering Fraud.
4. DeFi Insurance: Protecting the "Code"
Standard insurance ignores DeFi. You need On-Chain Mutual Cover (Nexus Mutual). Covers Smart Contract bugs. ROI Check: If yield is 5% and cover is 2%, your real yield is 3%.
5. The "Custodian Insurance" Fallacy
The Custodian is the beneficiary, not you. If they are hacked, they get paid. You might get nothing. For >$20M treasuries, get a "Direct Loss" policy where YOU are the beneficiary.
6. Claims Management: Why Insurers Say "No"
Denial reasons: No MFA/YubiKey, Lack of RBAC (negligence), Outdated Software.
A "Claims Checklist" table. Column 1: Incident Type. Column 2: Is it covered? Column 3: The "Gotcha" (The reason they won't pay).
7. Building Your Own "Insurance" (Redundancy)
Real insurance: 1. The 3-Custodian Rule (diversify). 2. Self-Insurance Fund (set aside fiat). 3. Proof of Solvency Audits. Don't rely on a policy; build resilience.
Conclusion: Last Line of Defense
Security stops the hack. Operations stop the error. Insurance is only for Black Swans. Don't buy a policy and stop worrying. Build a process.
F.A.Q // Logical Clarification
Does Cold Storage mean I'm insured?
"No. Cold storage is security, not insurance. You can be cold and uninsured."
How much does it cost?
"Direct policies: 0.5% - 2.0% per year."
Are stablecoin de-pegs covered?
"No. Requires niche "De-peg Cover"."
What is Slashing insurance?
"Staking providers (Blockdaemon) offer it to cover network penalties."
Module ActionsCW-MA-2026
Institutional Context
"This module has been cross-referenced with Operations & Security / Risk Management standards for maximum operational reliability."