Prize indemnity insurance
From Wikipedia, the free encyclopedia
Prize indemnity insurance is indemnification insurance for a promotion in which the participants are offered the chance to win prizes. Instead of keeping cash reserves to cover large prizes, the promoter pays a premium to an insurance company, which then reimburses the insured should a prize be given away.
[edit] Hole-in-one insurance
One of the earliest and most common forms of prize indemnity insurance is hole-in-one insurance, which began to gain prominence during the early 1980s.[1] Hole-in-one insurance, in golf, is prize indemnity insurance, often bought by a golf tournament host, to be paid if the tournament awards a prize to contestants who hit a hole-in-one during the tournament.
According to the magazine Golf Digest, the odds of an amateur golfer hitting a hole in one are about 1 in 12,750.[2] These low odds allow golf tournaments to offer large prizes to contestants able to hit a hole-in-one during the tournament as part of a marketing promotion. In order to be able to afford such a prize, tournament hosts can buy prize indemnity insurance to protect themselves from having to pay the prize from their own funds.
Golf tournament hosts will often offer a hole-in-one prize to promote a tournament sponsor. For example, if a tournament is being sponsored by a car dealership, the tournament might offer a new car from the dealership as the prize for hitting a hole-in-one. The relationship between the tournament host and the sponsor is usually set up to provide advertising for the sponsor, prominently displaying the sponsor's name next to the prize during the tournament.
Companies that provide hole-in-one insurance may provide signs or other accessories to help the tournament host promote the hole-in-one prize. The insurance contract between the golf tournament and insurance company will detail rules such as: which holes on the course the prize will be insured on, how to verify the hole-in-one was achieved legitimately, and what to do if a contestant hits a hole-in-one on a hole other than the insured hole. Variables that affect the cost of the hole-in-one insurance include: the number of participants in the tournament, the skill of the participants (amateur vs. professional golfers), and the length of the insured hole.
[edit] Other prize indemnity insurance
Companies have increasingly sought prize indemnity insurance for other promotions. For example, in the 2005 Super Bowl, prizes were set to be awarded for several events, including a return of the opening kickoff for a touchdown, a safety, and a fourth-quarter field goal of 50 yards or more. These prizes were all insured by a Georgia-based prize indemnity insurance company. None of the events occurred in the game.[3]
