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. 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.
Hole-in-one insurance, often purchased by a golf tournament host or sponsor, reimburses tournament organizers for the cost of awarding a hole-in-one prize in the event a tournament participant successfully hits a hole-in-one during the tournament.
The odds of an amateur golfer hitting a hole in one are about 1 in 12,500. These low odds allow golf tournaments to offer expensive prizes to golfers able to hit a hole-in-one during tournament play. In order to be able to afford such expensive prizes, tournament hosts can purchase prize indemnity coverage to protect themselves from having to pay for the prize from their own funds.
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, and how to verify the hole-in-one was achieved legitimately. 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), the length of the insured hole, and the value of the prize being offered.
In addition to hole-in-one insurance for golf events, prize indemnity insurance companies typically offer coverages for other types of contests as well. For example, contest coverage can frequently be purchased for contests such as half-court shots in basketball, field-goal kicks in football, home runs in baseball and blue-line goals in hockey. Such coverage is frequently purchased for contests at high-profile events such as the Super Bowl, World Series, NBA Finals, and many all-star games.
Most television game shows pay for prize indemnity insurance for million-dollar prizes. In 2008, such an insurance provider demanded RTL Group toughen million dollar win provisions after The Price Is Right $1,000,000 Spectacular ran off with three millionaires in six episodes, reducing the million-dollar win provision in the Showcase from $1,000 to $500. However, this would have only produced one less winner had it been used at the start of the series, as one of the two Showcase winners was within $500, and the other won her million in the Million Dollar Game.
The Daily Omnivore 
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