Prize Indemnity Insurance allows businesses of all sizes to conduct promotional events featuring high-value prizes, such as cash, cars, or even homes, without incurring financial risks.

If your business, non-profit, charity, or organisation intends to offer a high-value prize, here are five ways that prize indemnity insurance can help you assess the risks and gain complete clarity on your idea before launching it to your target market.

Picture of a car with a gold ribbon depicting a high value prize that could need prize indemnity insurance.

Five ways prize indemnity insurance drives clarity on your promotional ideas

1. Prize Indemnity Insurance is a Risk Transfer tool

As with any insurance cover, insurance is a risk transfer tool for your business. Depending on the type of insurance policy you buy, the policy will cover specified risks to your business. The process of applying for prize indemnity is an exercise that will ensure you have complete clarity on the risks and operational needs to make the idea a success before launching it to your target market.

In this case, prize indemnity insurance enables you to transfer the financial risk of paying for a high-value prize to the insurer should someone win. Therefore, the insurer will pay should someone win, ensuring the participant receives their prize.

2. Applying for prize indemnity insurance is a Reality Check

When calculating your premiums for prize indemnity insurance, the insurer will look at the value of the prize and the likelihood of someone winning.

It’s worth noting, that if the chances of winning are very good, the insurer may not offer cover. The reason is that the insurer may be out of business if they must pay multiple high-value prizes.

If an insurer is unwilling to provide cover, it could be a sign that you need to rethink your prize strategy to protect your business from significant financial losses.

3. Offering High Value Prizes May Be an Effective Marketing Tool

When done well, high-value prizes can be a great marketing tool for your business. That’s because they are known to drive loyalty, brand awareness, sales revenue and more for your business or charity.

Prize indemnity insurance can help protect your business from the financial risks of offering the prize(s) should someone win. It may also mean you don’t need to buy the prize upfront.

4. The application process requires clarity on your Terms & Conditions

Prize indemnity insurance comes with strict terms and conditions that can help you gain clarity on how you run the competition and the rules for participation.

Should the prize be won, and you make a claim, you must show that you upheld the competition rules. The insurer can deny claims if a participant has an unfair advantage.

5. Applying for prize indemnity insurance requires clarity on your competition type

Insurers tend to prefer probability-type competitions to skills-based competitions because they can make a more straightforward calculation on their expected loss and the cost to you in the form of a premium.

For games of skill, insurers tend to have matrices of the number of times the likelihood of someone completing the challenge, such as a hole-in-one, may occur. The risk to you and the insurer may be higher if the chances are high.

It’s vital to consider the type of competition you run and the chances of someone winning. It will impact your insurance premiums, and your pocket should you decide to self-insure.

Good Advice on Prize Indemnity Insurance

For expert insights into prize indemnity insurance and how it could benefit your business, consider having a no-obligation chat with one of our experienced risk and insurance advisers.

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.

Clear Insurance Pty Ltd. ABN. 41 601 916 689. AFSL No. 548953.