InsuranceFi
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Insurance Contract Knowledge

Contract

1. Overview

Everyone gains financially during a bull market, but as you are aware, it might stop at any time. In a bear market, making money is good, but better keep it safe. InsuranceFi saves your fund and gives you passive income. When you stake IF tokens to profit from the BUSD vault, there is a risk that the price of IF tokens will decrease causing your investment to decrease in value. The insurance contract will help you cover this reduced value, thereby helping you to limit your losses and be more secure when participating in the BUSD staking vault. Then you can receive passive income sustainable by BUSD and rest assured to do other things when your deposit has been supported by the insurance contract to prevent risks.

2. How does it work?

When you choose staking, you will choose the lock time to deposit the $IF token. Each different lock period will have a different corresponding APR, and you can choose to sign or not to sign an insurance contract. Cost of the Insurance Contract will be started from 10% of the total IF staking amount and increase if the lock time is longer. Please note that Insurance Contract cost can be changed from time to time based on the calculation of the protocol. The fee of the insurance package will be collected in IF tokens. After participating in the protocol, you will receive daily BUSD income. There will be a fixed price when you start staking, called the deposit price, which will be calculated on the IF/BNB pair. Suppose after the due date withdraw the staking package and the IF/BNB price is decreased by 10% then the protocol calculates the corresponding loss of the token to be 10% and compensates 110% of the IF token amount
For example:
  • You deposit 1000 Tokens IF to the InsuranceFi Vault
  • IF/BNB is 10% off the deposit price
  • You lose 10%, the protocol calculates 10% of 1000 IF tokens, which is 100 IF, and compensates 110% of these 100 IF, which is 110 IF
  • You can withdraw fully 1000 IF tokens and claim another 110 IF tokens from the Insurance Fund. Total 1110 IF.

3. Insurance Fund

The insurance fund is used to compensate for the losses of investors who deposit into the InsuranceFi Vault. The fund not only receives from the fee of the insurance plan, but is also filled by a variety of sources, to ensure that the fund is sufficient to compensate investors.

Insurance Contract Fee

The insurance contract fee is the cost of buying an insurance plan (a.k.a sign insurance contract) when an investor participates in staking in the InsuranceFi Vault, the initial cost is set at 10% of the total IF amount deposited and may change depending on the time and according to the protocol's calculation.

Tax From Trading Volume

1% from buying tax and 1% from selling tax will be transferred to the Insurance Fund

20% of The IF Tokens in The Total Supply

There will be a total of 20% of The IF tokens in the total supply being vested to ensure that the insurance fund is always enough to compensate users.

Insurance Liquidation (Must Read)

At each time there will be an increase in the price causing the insurance contract to be liquidated. The protocol is calculating by default the price increase leading to contract liquidation is 50%. I.E. if you sign an insurance contract and deposit at price IF/BNB = A, and after IF/BNB goes up at 1.5A, your insurance contract will be liquidated and your staking plan will not be insured anymore, but you can completely early unlock the staking package and take profits, this ensures the insurance fund is always filled. Thus, profitable investors will also pay a portion of the deduction to the insurance fund, helping users who lost to be better protected.

Early Unlock Fee

If you unstake earlier than the lock time of the staking package, you will lose 10% of the original IF stake, and if you choose the insurance package, it will not be effective when you unstake. Thus, the penalty fee for early unlocking and the liquidation insurance package will enrich the Insurance Fund and increase the level of protection for investors who remain with the project.

4. Limited Number of Insurance Contract

What if the majority of investors who sign the insurance package lose money, it is very likely that the insurance fund will not be able to pay fully. This must be your question, but it is also the first question our team asked ourselves when we came up with the idea of ​​the insurance protocol. To ensure that all investors who sign an insurance plan are protected, we will limit the number of insurance contracts. There will be a maximum number of IF tokens covered by the insurance fund, which the protocol can calculate. And Insurance fund is filled by many sources, so the protocol will calculate accurately for the most protected investors and also eliminate the possibility that the insurance fund is no longer able to pay.

5. Calculating Compensation

  • When you sign the insurance contract, the price of the IF/BNB pair will be fixed at the time of deposit. The loss rate will be calculated by:
LR = 1 - [ (IF/BNB*withdrawal ) / (IF/BNB*deposit ) ]
LR: Loss Rate
IF/BNB*deposit: Price IF/BNB when you deposit to the Vault
IF/BNB*withdrawal: Price IF/BNB when you withdraw your stake from the Vault
  • Insurance Fund will compensate the number of tokens IF:
IF Compensation = LR * Number of IF Deposit * Compensation Rate
IF Compensation: Number of IF token you can claim from the Insurance Fund
Number of IF Deposit: Number of IF token you deposited to the Vault
Compensation Rate: The rate for claiming compensation
For Example:
You deposited 1000 IF to the Vault and then signed an Insurance Contract
Your Lose Rate = 0.1 (10%)
Compensation Rate for LR ≤ 10% is 110%
=> IF Compensation = 0.1 * 1000 * 110% = 110 IF
You can fully withdraw a total of 1000 IF from the Vault and then claim 110 IF from Insurance Fund. Totally you get back 1110 IF
  • Compensation Rate is calculated according to the following:
0 < LR ≤ 10% -> Compensation Rate = 110%
10% < LR ≤ 99% -> Compensation Rate = 100%
  • Notice: Compensation from Insurance Fund uses IF tokens and is calculated according to the IF/BNB price pair. In case you lose and Insurance Fund compensates you with IF tokens but you may still face a loss in USD value. An Insurance Contract may help you to reduce your loss but may not fully compensate the entire investment value in USD, so you should always consider and calculate carefully before your investment decision.