Cryptocurrency is the new frontier in digital commerce. If you’re an insurance agent, chances are you’ve had at least one client inquire about investing in or purchasing cryptocurrency. There are risks associated with buying and selling cryptocurrencies. So, as an insurance agent for cryptocurrency professionals, it’s essential to understand what types of coverage exist for this type of risk.
What is Cryptocurrency?
A cryptocurrency is a digital currency that uses cryptography to control how many new units can be made and ensure that transactions are legitimate. Cryptocurrencies are not legal tender, but they can be traded for goods or services (usually as “tokens”) or on cryptocurrency exchanges like Coinbase and Kraken.
Cryptocurrencies are decentralized, meaning they are not controlled by any central authority like a bank or government; instead, they run on open-source software and use peer-to-peer networking. These situations suggest that anyone with an internet connection has access to cryptocurrencies, which makes them more accessible than traditional forms of currency like U.S. dollars.
Cryptocurrencies offer consumers many benefits over traditional currency:
- Lower fees for transferring funds across borders.
- Little need for a middleman (like a bank).
- No chargebacks on purchases.
- Anonymity when buying goods online.
- Greater security than credit cards.
- More privacy because accounts aren’t linked with personal information like names or addresses.
- No third-party monitoring transactions unless needed by law enforcement agencies (for example, when investigating illegal activity).
What are the Risks of Dealing with Cryptocurrency?
While cryptocurrency is a relatively new technology, it still carries risks for unfamiliar people. This risk applies to insurance agents who take on clients who want to invest in or use cryptocurrencies. These agents might not fully understand their clients’ needs and be able to help them make intelligent choices about how to use or invest in cryptocurrency.
It’s important for insurance agents who deal with cryptocurrencies professionally to have professional liability insurance coverage to protect themselves from malpractice claims.
Errors and Omissions (E&O) Insurance Coverage for Cryptocurrency Agents
If you’re an insurance agent or broker, insurance for cryptocurrency agents isn’t just for accountants and lawyers. All agents who handle cryptocurrency-related investments should have E&O coverage. Agents must understand why E&O insurance is critical to their careers.
What Is Errors & Omissions Insurance?
Errors and omissions (E&O) insurance cover claims of professional liability made against you as an agent because of your mistakes. Some examples are misreading a policy, filling out the paperwork wrong, misrepresenting the terms of a contract, or telling clients about risks incorrectly. Because these mistakes can cause significant financial damage to clients (and even ruin their businesses), E&O policies protect you if someone brings suit against you because of one of these errors.
Other Recommended Professional Liability Insurance Beyond E&O Coverage
Professional liability insurance is a type of professional insurance that covers an individual’s liability for errors and omissions in the course of their work. E&O coverage is essential, but other kinds of professional liability insurance agents should consider the following professional liability policies that may be combined with E&O coverage and recommended by agents to reduce exposure to other losses for their clients:
Cyber Liability Insurance: Cyber Liability Insurance protects companies from financial losses caused by hacking attempts on their computer systems or networks. It pays for losses caused by hackers who try to steal trade secrets or other private information from different industries. For example, healthcare providers who follow HIPAA laws about patient privacy and collect personal information may want this kind of protection.
Privacy Liability Insurance: This type of coverage is often used by businesses that collect personally identifiable information (PII), like financial institutions and health care providers, who must follow HIPAA laws about patient privacy. It can also be used by companies that store private data on their servers, including credit card numbers, bank account numbers, driver’s license numbers,s and Social Security numbers.
Cyber Extortion Insurance: This coverage is often used by businesses that find themselves victims of a cyber extortion attempt. In this case, hackers will try to get private information and then threaten to release it if they don’t get paid.
Privacy Breach Insurance: This covers a company’s legal expenses if they suffer a breach in security and lose private data due to employee error or computer hacking.
Conclusion
The cryptocurrency industry is growing, and it’s important for insurance agents to understand the risks. Professional liability insurance can help protect your business by covering claims like errors and omissions (E&O) and breach of contract.