Policy Coverage Exclusions

Policy coverage exclusions are the specific conditions, events, or types of losses that are explicitly not covered by an insurance policy. In the context of digital asset custody, common exclusions often include losses resulting from user error, such as sending funds to the wrong address, or losses due to market volatility.

Other typical exclusions involve losses caused by regulatory changes, government seizure, or failures of the underlying blockchain protocol itself. Understanding these exclusions is critical for institutional investors, as they define the gaps in their risk management strategy.

Custodians often work to narrow these exclusions to make their services more attractive, but some risks are inherently uninsurable or prohibitively expensive to cover. Investors must conduct thorough due diligence to understand what is not covered and how to mitigate those residual risks through other means, such as internal controls or diversification.

Exclusions are a fundamental aspect of the insurance contract, reflecting the boundary between manageable risk and systemic uncertainty.