Custody Insurance

Overview

Policies may cover certain external theft, employee dishonesty, physical damage, cyber events, or loss of key material. Coverage can apply to the custodian as policyholder rather than directly to each client, and the total limit may be shared across all affected customers.

Insurance rarely protects every cause or the full market value of assets. Exclusions can involve user-account compromise, protocol failure, smart-contract bugs, price loss, war, sanctions, unsupported assets, or failure to follow required controls. Deductibles, sublimits, valuation rules, and claim procedures materially affect recovery.

Clients should request current policy details, insurer identity, covered locations and wallet tiers, aggregate limits, exclusions, and evidence of how claims proceeds reach customers. Insurance supplements custody controls and financial resilience; it is not proof that assets are segregated, risk-free, or fully recoverable.

Custody Insurance should be distinguished from investment ownership and from a software interface. For example, a provider may display an asset balance while holding pooled assets through another custodian; operations must verify contractual rights, segregation, withdrawal capability, and external evidence rather than rely on the screen alone.

Custody Insurance works through controlled onboarding, asset receipt, internal attribution, storage-tier assignment, authorization, signing or provider instruction, monitoring, withdrawal, reconciliation, reporting, and return or migration. For Custody Insurance, each handoff needs stable identifiers and an authoritative record of who approved and executed it.

For Custody Insurance, risks include key compromise, insider abuse, commingling, inaccurate books, unsupported tokens, provider insolvency, sub-custodian failure, blocked withdrawals, lost recovery material, and ambiguous liability. For Custody Insurance, controls should combine least privilege, separation of duties, verified destinations, asset segregation, limits, monitoring, and continuity tests.