If insurance for Bitcoin were available for Bitcoin losses what kind of losses would the insurance cover?

  • 1
    That has some similar challenges as insuring cash in your wallet. – Murch Jan 28 '16 at 9:14
  • Your title and your question seem unrelated. Perhaps you should change the title. – user2277550 Jan 28 '16 at 10:54

It is covered by a cyber-insurance policy, the kind taken out by businesses that need to provide proof of security audits, etc. in order to get the insurance. NAIC lists things that would be covered (http://www.naic.org/cipr_topics/topic_cyber_risk.htm), which includes; "Theft of valuable digital assets, including customer lists, business trade secrets and other similar electronic business assets." These policies are not typically offered to individuals.

The problem, and the reason why this is true, is that these policies are very expensive, relative to cost, and there is a adverse selection problem in insurance (https://en.wikipedia.org/wiki/Adverse_selection), as well as moral hazard (https://en.wikipedia.org/wiki/Moral_hazard) - so insurers won't ever fully cover these small risks that they can't observe or protect against, because they will end up losing money on them.

  • Can you give an example of a policy that actually, specifically, covers cryptocurrency losses? The NAIC list just describes some things that a policy might cover, and cryptocurrency is not really similar to "customer lists" and "business trade secrets". – Nate Eldredge Jan 30 '16 at 18:11
  • Yes - any policy that doesn't specify what is meant by digital assets, and doesn't exclude cryptocurrency is going to be interpreted broadly by the courts. There is a presumption in insurance that it's covered unless explicitly excluded. For example, see: goo.gl/Jn2uzN - and this is why insurance contracts are basically lists of exclusions. We'll start to see standard exclusion language here at some point, but AFAICT, it's not there yet. Check your policy! – David Manheim Feb 12 '16 at 20:18

Insuring bitcoins would be very difficult to practically implement. It is very easy to transfer them to an address you own and claim they have been lost.

  • Insuring Bitcoin is easy to do but no one will take on the risk and it is all but impossible to prove an actual loss. Anatomized transactions are such that an insured client is not the same person who stole or caused the loss. So there is no premium level that would satisfy claim losses if paid. – Alfred Jordan Apr 29 '17 at 20:55

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