DeFi insurance products aim to compensate users for specific on-chain losses—often smart contract failures, stablecoin depegs, or exchange hacks—subject to policy terms. Coverage is not equivalent to bank deposit insurance and varies widely by protocol.
How coverage typically works
- Members or liquidity providers capitalise a mutual or underwriting pool
- Users purchase cover for named protocols or event types
- Claims are assessed against policy wording and governance votes
- Payouts depend on available pool capital and claim approval
What is usually covered—and what is not
Coverage may include defined smart contract exploits or oracle failures listed in policy documents. It generally excludes user phishing losses, private key compromise, undisclosed admin rug pulls, and events outside stated terms. Always read exclusions before relying on cover.
Due diligence before buying cover
- Verify the policy covers the exact protocol version you use
- Check capacity limits and whether cover was recently reduced
- Understand claim timelines, evidence requirements, and governance risks
- Treat insurance as one layer—not a replacement for wallet hygiene or audit review
Important disclaimer
This material is educational only. It is not financial advice, does not recommend specific products, and does not guarantee claim approval or payout amounts.