eToro Investment Insurance – How to Use It?
Investment insurance is a tool by which an investor protects his investments from destruction, loss, and depreciation. Thanks to the use of such methods, it becomes possible to reduce the number of transactions that bring losses as a result of circumstances beyond the investor’s control.
Investment insurance is the primary prevention of the onset of financial risk, which can also manifest itself in different forms. When an investor loses his money or profits due to fluctuations in the foreign exchange market, this risk is called foreign exchange risk. If the reason for the losses was political circumstances or spontaneous force majeure events, it will be classified as catastrophic.
Commercial risk is the financial collapse of a project due to internal economic conditions (competitive environment). Market and interest rate risks are also distinguished, both of which are associated with changes in the financial instruments of the market.
This was a small overview of investment insurance in general. We should move to eToro investment insurance which is triggered in case there is insolvency from the broker’s side. We will take a deep look at this topic below in our review.
How Does eToro Investment Insurance Work?
The insurance which eToro broker provides is purchased from Lloyd’s of London. The latter is the world’s one of the leading insurance markets, which provides services to businesses in different locations. Basically, with this insurance, you can get coverage of up to 1 million Euro, GBP, or USD depending on your location. This is activated in case something unexpected happens with eToro. What makes this insurance so special is the fact that every user automatically gets it without registration.
In case of an Event of Misconduct, clients will also be eligible for getting insurance from eToro. Only cash, CFD positions qualify for the coverage. Cryptocurrencies are not eligible for the insurance and it is set in the applicable Policy.
What are the Three Layers of Protection?
eToro broker offers its clients Three Layers of Protection in the case of the latter’s insolvency. Let’s find out more about these layers and how they look.
The first one is the assigned liquidator. We have mentioned that in the case of eToro’s insolvency, there is the insurance of your funds. In this case, the liquidator will manage assets and the distribution of eToro’s funds among your clients.
The next one is regulatory protection. The clients who are under FCA or CySEC’s regulatory schemes will compensate for the lost funds. The FCA will cover up to 85,000 GBP and CySEC – 20,000 EUR.
Private insurance, which we have already mentioned in our guide, is the primary insurance that is provided by Lloyd’s of London. In this case, if insolvency happens, the insurance will cover up to 1 million GBP, EUR, or AUD depending on your location.
One thing that we should also emphasize is that the insurance goes on for a long time and there is no particular date of its expiration, meaning that it will be available for a long time.
Segregated Account
When we talk about safeguarding clients’ funds, eToro broker has everything set up safely. The operator’s main priority is to keep its customers’ money safe, for which it uses a segregated account. If anything happens with eToro (the broker shuts down, goes bankrupt, etc.), your funds will be in safe hands, so you can not worry about them.
eToro Investment Insurance Pros and Cons
eToro investment insurance is indeed a perfect possibility to keep your funds safe in the case something happens with the broker. This is a feature that not many brokers provide to clients. While there are many advantages of investment insurance we can also note some disadvantages. Let’s have a look at them thoroughly below.
Pros
There are more pluses than minuses in investment insurance. It gives the investor confidence that investments will be preserved in any case and will give income. This makes their job less risky. Imagine that a broker goes bankrupt at some point – unexpected things happen frequently so the broker might desist the operation. When there is insurance provided by such a high-authority market as Lloyds of London, you are sure that nothing will happen to your funds.
Furthermore, this fact shows even clearly that eToro is a top-level broker, constantly caring about its clients and the safety of their investment. When there is a sense of responsibility from the broker it is generally good for both parties. Once again, not every Forex broker has the option of insuring your investments.
Cons
When we talk about the cons of investment insurance offered by eToro, there are not too many of them we can point out. There can only be additional investments, which, in the absence of an insured event, are not refundable. We talked about the three layers of protection that have some requirements, so particular customers might not be eligible to get the insurance from the broker. But you need to understand that investment losses will hit the budget harder than insurance fees.
Is eToro Investment Insurance Worth It?
In our guide, we have reviewed the Investment Insurance feature provided by the eToro Forex broker. It goes without question, that this is an incredible opportunity to keep your funds safe and secure even if something goes wrong with the broker. Three layers of protection add even more safety to your funds and everything is accessible without registration – every user automatically becomes a part of the insurance. The insurance is free and you are not required to pay additional money for it. We would definitely recommend this feature to every investor for which you do not even need to register.
FAQ
How Does eToro Investment Insurance work?
eToro Investment Insurance has a simple concept: in the case of the broker’s insolvency the insurance provided by Lloyd’s of London will offer coverage up to 1 million GBP, EUR or AUD depending on the region. At the same time, 3 layers of protection guarantee even more security of your money.
Where is My Money Held?
To make sure your funds are in safe hands, eToro broker uses a segregated account where the money is kept. Every cent deposited by the client will be kept there and if something happens with eToro the funds will be untouchable. However, considering eToro’s authority and reputation it is highly unlikely that the broker will go bankrupt.
What is Llyod’s of London?
Lloyd’s of London is a well-known insurance market, sometimes called (erroneously) an insurance company. It is the place where underwriters meet with insurance brokers to conclude insurance and reinsurance contracts. In our case, it provides insurance up to 1 million GBP, USD, or AUD to clients.