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What is Prize Indemnity Insurance?
Prize Indemnity Insurance
What is prize Indemnity insurance and how does it work? Well, have you ever wondered how businesses and charities can offer new homes, large sums of money, and expensive cars in competitions?
Prize indemnity insurance is one way to make it happen. It’s known as the hole-in-one insurance.
In short, it’s a type of insurance that enables companies to offer enticing, high-value prizes, and rewards without financial risk to the business. It transfers the financial risk of the prize to insurance. It also means businesses or charities with a small budget can offer a life-changing or high-value prize without the financial risk.
What financial risk does prize indemnity insurance cover?
Prize indemnity insurance enables you to transfer the risk of a high-value prize to insurance.
Example
Say you are running a hole-in-one golf competition with an expensive new car as the prize. If a participant gets a hole-in-one, the insurer will pay for the car. Therefore, the company can offer the reward without the financial risk of buying the car.
Why do I need prize indemnity insurance?
Offering high-value prizes may have benefits for your business, such as loyalty, increased patronage, high participation, brand awareness, and more.
However, there are financial risks to your business when offering high-value prizes.
Firstly, high-value prizes are expensive. Secondly, someone may or may not win. Thirdly, the prize(s) cost can leave a big hole in your cash flow and profit.
That’s why prize indemnity insurance is recommended to companies thinking about offering high-value prizes.
Your insurance adviser can help you understand your risks and how to transfer those risks to insurance.
How much does prize indemnity insurance cost?
The insurer will calculate your premium based on the value of the prize and the statistical odds of someone winning.
With prize indemnity cover in place, the insurer commits to paying for the prize, ensuring the winner receives their promised prize.
The policy will have a limit, generally equal to the value of the prize. That means the out-of-pocket cost to your business should someone win the award.
There are many insurers offering prize indemnity. Your insurance adviser will help you determine which product best suits your business needs and risk appetite.
Cyber Liability Insurance is designed to help protect you from claims and support your profitability in the event of a cyber breach or attack.
Public Liability insurance is there to provide protection if someone makes a claim against the insured, the business or its employees.
A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.
There are many insurers offering prize indemnity. Your insurance adviser will help you determine which product best suits your business needs and risk appetite.
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Do I need special terms in the competition rules?
Your insurance adviser will work with you and the insurer to help you develop clear contest guidelines that meet the terms of your insurance coverage.
Your business and participants must follow the competition rules set by the insurer. This ensures that the insurer will cover the prize and removes any unfair advantage that may void the insurance contract.
Prize Indemnity Insurance Examples
1. Pokie Machine Promotions
Clubs can use prize indemnity insurance for large-scale promotions. For instance, hitting a specific combination on a slot machine may trigger a huge payout. The club buys insurance to cover the cost of the potential payout.
2. Customer Rebates and Giveaways
Businesses may offer cash rebates or prize giveaways to customers who meet certain conditions, such as buying a product or using a specific service during a set period. Should the number of eligible participants exceed your expectations, the insurer can cover the cost of the rebates or prizes.
Good Advice on Prize Indemnity Insurance
If you would like to talk to an experienced risk and insurance adviser about prize indemnity insurance and how it can work for your business, contact Clear Insurance today.
Clear Insurance is here to help.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Clear Insurance, ABN 41601916689, AFSL 548953
This article originally appeared on What is Prize Indemnity Insurance? and has been published here with permission.
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