Prize Indemnity Insurance | Odds On Promotions

What Is Prize Indemnity Insurance?

Prize indemnification insurance, also known as contingency prize coverage, promotions insurance, contest insurance or most commonly, prize insurance, is a specialized form of insurance that protects businesses offering high-value promotional prizes or running large sales and marketing incentive programs from unnecessary financial risk.

Instead of absorbing the full cost or taking the financial risk of awarding a large prize (e.g. $1,000,000) the contest organizer transfers that risk to an insurance provider for a fixed, predictable cost.

Prize indemnity coverage is contingency based which means prizes are awarded only when specific conditions are met (e.g. someone making a half-court basketball shot, kicking a field goal during a half-time promotion, or unveiling a combination of winning squares on a scratch card. Prize indemnity coverage is primarily used by marketing and sales professionals as a promotional tool.

 

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Why Do Marketing and Sales Teams Use Prize Indemnity Coverage?

Big prizes grab attention. Unique and rewarding offers demand attention. Giving consumers the chance to get a 100% rebate on their purchases or a chance to win a new house, a year of free fuel or even $1,000,000 are just a few examples of how marketing and sales professionals use prize indemnity coverage to increase engagement, boost conversion rates, incentivize product trial, and create memorable brand experiences.

However, without prize indemnification or over-redemption coverage these kinds of attention-grabbing offers can lead to real financial exposure.  

With prize indemnity coverage, marketing and sales professionals can: 

♦Run attention-grabbing campaigns without financial risk.

♦ Offer larger prizes than their budget would allow.

♦ Make more compelling sales offers.

♦ Increase participation rates in contests, sweepstakes, and promotions.

♦ Stand out in crowded markets where standard incentives get ignored.
 

If your goal is to generate more leads, close deals faster, create a buzz, or simply engage a crowd, prize indemnity gives you marketing leverage without liability.

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How Does Prize Indemnity Coverage Work?

Prize indemnity is a simple arrangement in which a contest organizer or promotion planner pays a promotional insurance company a small fixed fee in exchange for eliminating a big financial risk.  Like a home or auto insurer, the prize indemnity company considers the expenses and risks associated with a particular contest or sales promotion in order to create an insurance policy.
 
Based on the size of the prize, the rules of the promotion, and the risk, the contest insurance company establishes a fee (the premium) which is a fraction of the value of the offer or prize that is being given away.  After the contest organizer agrees to the premium and any additional rules or documentation requirements, a policy is issued, coverage is bound, and the promotion can begin.  The client gets the benefit advertising the big prize, or attention-grabbing offer, while the prize indemnity company absorbs the financial risk of paying for the prize.  

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How Is Cost of Prize Indemnity Insurance Calculated?

To calculate the premium for a prize indemnity policy, the underwriter needs two key pieces of information: the dollar value of the prize (or the expected expenses of the sales offer) and the risks associated with the promotion, contest, or event being insured.

Obtaining coverage is typically a quick, consultative process. A prize indemnity consultant will ask questions such as: How many people will be participating? How will the contestants be selected? What are the general rules of the promotion? When and where will the contest take place? Underwriters use this information to evaluate the odds of someone winning or the event occurring. Based on the prize value and this assessed risk, the insurer will set a premium typically ranging from 3% to 15% of the value of the prize. 
 

  The cost of a prize insurance policy will be impacted by: 
♦ The Value of the Prize or Offer: The more expensive the prize, the higher the premium. 
♦ How Many People/Attempts:  Fewer contestants or attempts make coverage more affordable.

♦ The Odds of a Winner: The harder it is to win, the lower the fee. 

♦ The Type of Promotion: Skill, chance, etc.

♦ Contest Rules, Security and/or Validation Measures 

 

Example: 
If an NBA player participates in a half-court shot contest at a high school fundraiser to win a Mercedes, the promotion will be more expensive compared to one parent being selected to shoot and win the car. That's because an NBA pro has a 1 in 20 chance to make a half-court shot vs the 1 in 100 chances of the average person. If the contest rules state no professionals or college basketball players can participate, the cost will be lower since the average person is less likely to sink the shot and win the car.  

While both of these contests are insurable, the smart application of rules can make your prize indemnity policy more affordable.  A qualified prize indemnification provider will guide you through this process, helping you structure the promotion for affordability, easy compliance and maximum marketing impact. 

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Are There Different Kinds of Contingency Prize Coverage?

There are a number of different forms of prize coverage which fall under the generic "prize insurance" label including:   

♦ Skill-based contests like field-goal kicks, hockey shots, unusual putting contests, as well as other sports contests and promotions. 

♦ Probability and Games of Chance including dice rolls, lucky envelope picks, scratch cards, prize wheel spins and online contests. 
♦ Over-redemption Insurance: Protects marketers or contest sponsors if their promotion is too successful (i.e. money-back coupon offers). 

♦ Conditional Rebates:  Used to create promotions based on the weather (e.g., if it snows X" on a particular day) or sports team performance (e.g., a team wins a big game by X points). 
♦ Contractual Bonus: Used by sports teams and sponsors to cover the cost of a massive performance bonus if an athlete achieves a particular goal. 

♦ Weather Insurance:  As well as sales-based promotions, many prize indemnity companies offer weather coverage to protect large promotional events. 

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What Kinds of Organizations Use Prize Insurance?

Nearly every industry can benefit from using prize insurance to get maximum value from their marketing budget. 

♦ Auto Dealers, motorcycle dealers, and others use prize insurance for driving showroom traffic, for sponsoring vehicles at golf tournaments and other community events and sports venues.

♦ Casinos use contests and promotions to drive increased player traffic and incremental gaming revenues.

♦ Media outlets use promotions and contests featuring large prizes to sell more advertising and expand and engage their audiences.

♦ Businesses of all sizes, including marketing and advertising agencies, use big prize promotions to drive traffic to brick-and-mortar stores, social media and websites, tradeshow booths, and to maximize sponsorship opportunities.

♦ Non-profit organizations use contests and promotions, featuring attention-getting prizes to increase sponsorship sales, draw attention to their cause, and raise more money.

♦ Colleges & Universities, Professional Sports teams and Event Venues use skill-based big prize contests to boost fan engagement and sell more sponsorships.

♦ Financial Institutions use promotions to introduce new locations, highlight products, and support community events.

 

In short, nearly any industry or organization can benefit from incorporating insured prize promotions into their marketing mix.

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What are Some Popular Insured Prize Promotions and Contests?

♦ Half-Court Basketball Shot Contests

♦ Halftime Contests at Football Games

♦ Indoor Putting Contests

♦ Million Dollar Hole-in-One Contests

 

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How to Select a Prize Indemnity Company

Many insurance companies offer prize indemnity coverage, but only a select few are experts in the prize and promotions industry. The right prize indemnity partner should bring more than a policy, they should have:

♦ Strong underwriting backed by AM Best Rated carriers. 

♦ Experience in structuring successful promotions across a variety of industries. 

♦ Reasonable turn-around times, transparent pricing and clear terms. 

♦ Assistance with rules, compliance, and winner verification. 

♦ An easy to understand claims process. 

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Why Choose Odds On Promotions For Prize Indemnity Insurance?

Odds On Promotions' comprehensive prize coverage services are designed to eliminate the risks associated with crafting high-profile giveaways, giant-prize promotions and attention-grabbing contests for just a fraction of the actual cost of the prize or promotional offer. Our numbers & experience speak for themselves:

♦ 35+ Years of Experience - From auto dealers and casinos to sports teams, radio stations, nonprofits and everyone in between, we've spent over three decades delivering superior contest and promotion planning at competitive prices.
 

♦ $64 Million in Prizes Paid - A proven track record of paying winners quickly and fairly. 

 

Plus Odds On offers:
♦ AM Best Rated A+ Superior Underwriting

♦ Broad Coverage - We can insure almost any promotion or contest that involves a risk, in any venue,  up to $10,000,000.
 

♦ Worldwide Reach - We've worked with clients from around the world. No promotion is too big, too remote, or too unique.
 

♦ Personalized, Consultative Service - Our experienced team will guide you through every step of the process, from designing a promotion from scratch to insuring an existing event, ensuring your promotion is structured for success and your risk is fully covered. 
 

♦ Fast, Simple Claims Processing - When you report a winner, a routine investigation is conducted per contract terms and claims are typically paid within 2-3 weeks.

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