What the coverage is designed to respond to
Traditional crime and property policies were not built for assets that exist as keys on a ledger, and many contain exclusions or sublimits for digital assets. Custody coverage fills that gap. Depending on the form, it can respond to theft of private keys by an outside party, theft by an employee or insider, loss or destruction of keys in some circumstances, and fraud that induces the transfer of assets. The wording defines each of those events, and the differences matter.
How underwriters think about it
Underwriters price custody risk by looking at how assets are held and how access is controlled. They ask what share of assets sits in cold storage compared with hot wallets, how keys are generated and stored, whether signing requires multiple approvers, how the operations team is separated and what happens during staff changes. Insurers also look at whether a third party custodian is used and what that custodian's own coverage says.
Clean, documented answers to those questions are the single biggest influence on whether a market will quote and at what limit.
Limits, retentions and sublimits
Capacity for digital asset custody is limited compared with traditional lines, so a program is often assembled from several insurers layered together. Retentions apply to each loss, and there can be sublimits that cap the amount payable for particular storage methods, such as a lower limit for assets held in hot wallets. Reading the schedule of limits side by side with your actual custody mix tells you what is truly insured.
What a fund should ask before buying
Before you accept a quote, test it against how you really hold assets. The following questions surface most of the issues early.
- Does the policy cover the assets in every storage method I use, and at what limit for each?
- Does it respond to insider theft and to loss of keys, or only to outside hacking?
- How are assets valued at the time of loss?
- Does coverage extend to assets held by a third party custodian, or only to assets under my own control?
- What security conditions must I maintain for coverage to stay in force?
Last updated October 22, 2026. Written by the Alton Risk placement team.