A HODLer's Guide to Bitcoin Insurance

As a Bitcoin investor and saver, you’ve weathered the storms and held strong through the ups and downs of the market. You believe in Bitcoin’s long-term potential and have invested both financially and emotionally in its future. But as your Bitcoin holdings grow, so does the need to ensure they’re protected against the unexpected. While you’ve taken steps to secure your assets—whether it’s using a hardware wallet, setting up a multisig, or implementing other security measures—there’s one more layer of protection that can offer peace of mind: bitcoin insurance.

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What Does HODL Mean?

HODL is a term deeply ingrained in bitcoin culture, representing a long-term investment strategy and a philosophical approach to cryptocurrency ownership. Originally a misspelling of "hold" in a famous bitcoin forum post, HODL has evolved to mean "Hold On for Dear Life."  "Hodling," or holding Bitcoin in anticipation of its future value, is about believing in the long-term potential of bitcoin and its importance in the global financial infrastructure. HODLers are investors who maintain their bitcoin positions regardless of market volatility, driven by a strong conviction in bitcoin's future prospects. This strategy aligns with the view of bitcoin as a store of value and a hedge against traditional financial systems.

For HODLers, bitcoin insurance becomes particularly relevant as it provides an additional layer of security for their long-term holdings, protecting against unforeseen circumstances that could lead to loss of access or theft, and allowing them to focus on the future potential of their investment without constant worry about potential threats to their holdings.

So let’s explore how Bitcoin insurance is essential for those playing the long game.

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Importance of Bitcoin Insurance in HODLing

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1. Even the Best Security Setups Have Limits

You’ve likely gone to great lengths to protect your Bitcoin. From storing your private keys offline using hardware wallets or even combining them into a multisignature wallet, you’ve tried to do everything by the book. However, even the most secure setups aren’t immune to personal security errors or the unexpected scenario. Whether it’s a sophisticated hacking or kidnapping attempt, a phishing scam, or simply human error, there are always risks. Bitcoin insurance steps in where traditional security measures might fall short, providing a financial safety net if something goes wrong. In fact, in many instances of wrench attack (theft via a violent physical attack), insurance is the only dependable solution, as it does not depend on an individuals ability to withstand a threat of death.

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2. Peace of Mind for Long-Term Holding

“Hodling,” or holding Bitcoin in anticipation of its future value,  is about believing in the future of Bitcoin and its importance in global financial infrastructure. Part of Bitcoin’s value proposition is an owner’s ability to hold the bearer asset’s keys without the support of any other person or company. But with that advantage comes a certain level of additional risk, including physical loss of private key material. What happens if your private keys are lost, stolen or compromised? What if a physical disaster destroys your hardware wallets? What if a bitcoin owner holding private keys passes away without adequately preparing family members to recover their Bitcoin? Insurance offers reassurance that, if specific events cause you to lose access to your bitcoin, its insured value is protected. This added layer of security allows you to focus on the future without constantly worrying about potential threats.

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3. Protection Against Human Error

Some of the most painful stories about the loss of bitcoin are those where the owner made a fatal error causing a permanent loss that would go on to be worth millions of dollars or much more. As careful as you may be, accidents happen. Maybe it’s an error of simplicity: a misplaced hardware wallet during a move, not recording a seed phrase, or accidentally sharing sensitive information in a moment of distraction. Perhaps it’s an error of complexity, where the owner created for themselves a bespoke custody solution using private servers and once-best-practice security that had become outdated. Human error is one of the leading causes of Bitcoin loss, and insurance can help mitigate the financial impact. By having coverage in place, you can ensure that a simple mistake doesn’t lead to a significant loss.

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What to Look for in a Bitcoin Insurance Policy

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When considering Bitcoin insurance, it’s crucial to find a policy that aligns with your specific needs as a Bitcoin ‘Hodler.’ Here are a few key factors to consider:

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1. Coverage and Limits: Ensure the policy covers the full value of your Bitcoin holdings. Understanding exactly what causes of loss are covered is integral to securing high quality coverage. Always read the policy prior to buying coverage.

2. Policy Exclusions: Study the exclusions section of a policy to understand what causes of loss or circumstances are excluded. For example, some policies might exclude losses due to negligence or certain types of hacks, some may or may not cover crime by a custodian or crime committed by employees of the insured. Make sure the policy covers the scenarios you’re most concerned about. If you’re not sure why a particular scenario is excluded, ask your insurer for more information and if endorsements are available.

3. Reputation of the Provider: Work with an insurance provider that specializes in bitcoin and crypto. A provider with a solid reputation and experience in the crypto space is more likely to offer a policy that meets your needs and handles claims efficiently. The policy should also clearly state who is underwriting a policy. Carriers are typically rated with a letter grade: those with an A+, A or A- rating have the highest level of dependability of solvency and ability to fulfill their financial obligations.

4. Claims Process: Understand how the claims process works. You’ll want a provider that offers a straightforward and transparent process, so you can recover your losses quickly if you ever need to file a claim.

5. Premium: Make sure you understand how the policy works in relation to the price of Bitcoin, and how a policy is priced. How does its price compare to uninsured custody? Is there a deductible or co-insurance in the case of a loss?

As a Bitcoiner, you’re already ahead of the curve in securing your financial future. But protecting your assets doesn’t stop at cold storage or multisig wallets. Bitcoin insurance is an essential part of a comprehensive security strategy, ensuring that your investment is safe from risks beyond your control. At Anchorwatch we provide Bitcoin insurance policies and custody solutions for individuals and institutions, that ensure that your most valuable asset is secure, giving you peace of mind. To get in touch with us check out our Bitcoin Insurance offerings here or get in touch with an agent at agent@anchorwatch.com

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By choosing the right insurance policy, you can safeguard your Bitcoin against theft, loss, and human error—allowing you to be at peace of mind, no matter what the future holds.

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