Cryptocurrencies are on everyone’s mind. They’ve been around for only a decade, but they’re revolutionizing how we think about money and value. The topic of insurance for cryptocurrencies remains a tricky matter, though.
Insurance companies are reluctant to insure cryptocurrencies because they see them as volatile assets
- The insurance industry still needs to develop a standard for valuing cryptocurrencies, which makes it difficult for insurers to assess risk and determine premiums.
- Cryptocurrencies don’t offer the liquidity of other financial products. If you buy a cryptocurrency and want to sell it before its value has risen significantly, you may need more time to do so.
Insuring cryptocurrencies is no different than insuring other assets
The good news is that insurance for cryptocurrencies is no different than insuring other assets. At its core, cryptocurrency is a form of currency and can be insured like any other asset.
Insurance companies are already starting to jump into the market, with Lloyd’s of London planning to offer coverage for cryptocurrency investors. There has been a lot of discussion about how regulation will impact this emerging industry, though. The advent of insurtech may help move things along more swiftly.
Insurance providers are capable of insuring cryptocurrencies, but there are no regulatory guidelines
Several insurance providers can provide you with coverage for the use of cryptocurrency. However, these companies are primarily concerned about the volatility of cryptocurrencies and their security.
Because cryptocurrencies aren’t legal tender everywhere, insurance companies may be hesitant to insure them. It remains difficult to quantify their value as an investment vehicle.
Insurance companies have concerns about storing cryptocurrencies in the event of a claim
Insurance companies are concerned about the volatility of cryptocurrencies. Plus, they still need to figure out how to protect themselves from a sharp drop in value and how to pay out claims if this happens.
Insurance companies are also concerned about the lack of regulation in this area. That makes it difficult for them to understand what’s covered and what isn’t and how much risk they should accept on your behalf. There’s a big lack of clarity around what would happen if there was a claim: who would pay out? Where do you send your coins? How do you prove that they belong to you?
Insurance contracts have always been straightforward. One party pays another party if something bad happens; usually with some deductible included. Unfortunately, that’s where the problem lies regarding cryptocurrency coverage because there aren’t any clear rules.
Once regulations are in place, cryptocurrency insurance will become more common
Once regulations are in place, cryptocurrency insurance will become more common. As a result, insurance companies can offer more comprehensive coverage, competitive rates, and flexible policies and options for customers.
Conclusion
We know that insurance companies are reluctant to offer cryptocurrency insurance, but they can do it. They’re just waiting for the right time. Many of these companies already have policies for cryptocurrency-related clients seeking their services.
If you own a substantial amount of crypto, it may make sense to purchase some insurance for cryptocurrencies if available.
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