DeFi Insurance
DeFi insurance provides coverage against smart contract failures, hacks, and other protocol risks. As DeFi grows, insurance has become an important risk management tool.
How DeFi Insurance Works
- Coverage Purchase: Buy coverage for specific protocols
- Premium Payment: Pay ongoing premiums based on risk
- Incident Occurs: Covered event (hack, exploit) happens
- Claim Submission: Submit claim with evidence
- Assessment: Protocol evaluates claim validity
- Payout: Valid claims receive compensation
Coverage Types
Smart Contract Cover: Protects against code bugs and exploits. Custodial Cover: Covers centralized custody failures. Stablecoin Depeg Cover: Pays if stablecoin loses peg. Slashing Cover: Protects validators against slashing.Major Protocols
Nexus Mutual
- Mutual model with member risk sharing
- NXM token for staking and governance
- Covers many protocols
- Claims assessed by stakers
InsurAce
- Multi-chain coverage
- Portfolio-based options
- INSUR token for incentives
Risk Harbor
- Algorithmic, automated claims
- Parametric products
- Faster payouts
Evaluating Insurance
Coverage Scope: What exactly is covered? Exclusions: What is NOT covered? (Rug pulls, user error often excluded) Claim Process: How are claims assessed? Pricing: Typically 2-10% annually of coverage amount.Is Insurance Worth It?
Consider Insurance When:- Large positions in single protocols
- Exposure to newer protocols
- Lower risk tolerance
- Institutional capital
- Small positions
- Highly diversified portfolios
- Very conservative protocols
- Short-term positions
Self-Insurance Alternatives
Position Sizing: Size positions so maximum loss is acceptable. Diversification: Spread risk across many protocols. Risk Reserves: Set aside yields as self-insurance fund.FAQ
Is DeFi insurance worth the cost?Depends on position size and risk tolerance. Large single-protocol positions often justify it.
What is not covered?Common exclusions: rug pulls, governance attacks, user errors, pre-coverage events.
How are claims decided?Varies by protocol. Some use staker voting, others use automated triggers.
Related Topics
Explore: [smart contract risks](/insights/learn/smart-contract-risks), [oracle risks](/insights/learn/oracle-risks).
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