DeFi Insurance: What You Need to Know

What is DeFi Insurance?

A selection of coverage policies offered by Unslashed. Image courtesy: Unslashed

How Does it Work?

Example Process

  1. First, you’d need to find an insurance platform that offers the coverage you’re looking for, bearing in mind the premium cost, covered events, and exclusions.
  2. Once you’ve found a suitable protocol and coverage policy, you may need to sign up and create an account on the platform — this might entail completing KYC.
  3. You would then select the amount of coverage you need and then pay the insurance premium. This is usually paid as a lump sum, rather than monthly as with traditional insurance providers.
  4. The policy details will then detail whether the policy kicks in right away or if there is a waiting period. Once the policy is in effect you will then be covered under the terms of the policy and will have the opportunity to raise a claim if you have suffered a loss.
  5. If you need to make a claim, you then usually need to prove that they have been affected by an incident. You might do this by providing a transaction hash or a wallet address.
  6. Once you have provided proof, you will need to submit a claim to the platform. It will then be reviewed by either a dedicated claims team, a group of specialized assessors, or in some cases, by other stakeholders (such as the underwriters).
  7. If the claim is approved, you will receive your payout to a wallet of your choice.

Who Are the Major Players?

  • Nexus Mutual: One of the earliest movers in the DeFi coverage industry and widely considered to be one of its most prominent pioneers, Nexus Mutual has been providing coverage against smart contract failures and hacks since May 2019. Built on the Ethereum blockchain, Nexus Mutual allows anybody to become a member and provide assets to the mutual. It currently offers well over 100 different coverage products, with premiums as low as 2.6% per year.
  • InsurAce: InsurAce currently offers protection for 140 different protocols across 20 different public chains, making it one of the most comprehensive DeFi insurance platforms around. The platform covers a variety of potential risk events, including smart contract vulnerabilities, IDO event risks, and stablecoin de-peg events, and allows users to underwrite insurance risks by providing their capital in return for I$INSUR token rewards.
  • Bridge Mutual: Like most DeFi insurance platforms, Bridge Mutual allows anybody to hop on board as a risk underwriter by providing their capital to the protocol. Bridge Mutual is one of the simpler to use DeFi insurance platforms and features all the common features you’d expect from one of the most popular options — including a wide array of coverage plans and token staking features. It also includes a unique shield mining product that users and projects can use to boost their yields.
* Figures correct as of May 1, 2022.

Moving the Needle



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