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The policy's duration is expressed in weeks and begins at 0:00 UTC on the chosen start date (Sunday) and ends at 0:00 UTC on the chosen end date (Sunday).
Policyholders will get compensation up to the maximum coverage amount in the event that USDC is lost as a result of a smart contract exploit, depending on the actual loss caused by the vulnerability.
100% of the covered amount will be paid out if the exploit removes 100% of the USDC from the protected protocol.
When less than 100% of the USDC is taken out of the protected protocol by the exploit, a lower quantity should be used. In the event that the exploit removes 70% of the USDC from the protected protocol, for instance, 70% of the covered amount will be paid out. The fact that the remaining 30% is retained means that policyholders can still be made whole.
In the unusual but nonetheless probable event of collateral shortfall (insufficient collateral to compensate policyholders), policyholders will receive collateral in proportion to their shares of the overall coverage amount.
A collateral shortage event may occur when multiple policies, such as Compound and AAVE, are activated at the same time and there is insufficient collateral to pay out the harmed policyholders from both protocols. It is a low-probability event, but it is difficult to eliminate such a risk in all insurance scenarios
Additionally, policyholders are eligible for a return if the required collateral amount is less than the outstanding insurance amount. Such a scenario could be triggered by a large reward, for example. The unprotected amount will be automatically repaid to policyholders' wallets every week until adequate collateral deposits are made to cover the outstanding policies.
Claims can be submitted on-chain, and pool managers will be notified to conduct a payout.