If you're organizing a fundraiser or other large community event, you want your function to go off without a hitch and attract a large crowd. There's no better way to get community participation than to offer some kind of amazing prize via an exciting giveaway, contest, or promotion. It could be a cash prize to the winner of your 5K or a brand-new car from the local dealership for kicking a 50-yard field goal at halftime. 

Whatever your prize, promotions like this are a great way to incentivize community participation. But have you ever wondered who pays for the prizes and giveaways?  

Who Actually Pays for Event Prizes?

People often assume that sweepstakes prizes are donated out of a company’s pocket or maybe through donations or sponsors, this might be true in a few cases. Or Maybe you thought that a portion of the collected entry fees were set aside to help fund event promotions. 

On a small scale, those strategies might work, but you don't want your event to be small scale, which means offering a substantial prize as the centerpiece of your event. But a substantial prize means substantial cash.

In most cases, event organizers use what’s called prize indemnity coverage. Rather than shouldering the burden of a huge cash prize or expensive Caribbean vacation yourself, an agency that offers indemnity coverage can shoulder the burden for you should the prize be won during your event.

How does indemnity insurance work? The same as any other kind of coverage, with subtle, industry-specific differences. The event organizer pays the carrier a monthly premium, and in exchange, if someone actually wins the prize, the company foots the bill so that you don't have to pay out-of-pocket.

How Does Grand Prize Coverage Work?

It works just like the traditional coverages you’re used to seeing and the decision to extend the policy, as well as the cost of the premiums, are based on a number of factors, just like how your car insurance depends on your record or your car.

The single most important factor is the prize being offered. The higher the prize, the higher the premium. But that's not the only factor considered. The odds of winning the prize are also important and used to calculate how much coverage you need! 

For example, if the prize is high but the odds of winning are astronomical, then the premiums would conceivably be lower.

It's also important to consider whether winning the prize is simply a matter of odds, or if it also involves skill. For contests that are odds-based, calculating a premium is simple. The cost of the premium will be in direct proportion to the odds of winning. But things get infinitely more complicated if you offer a game that involves skill as well.

How Important is it to Carry Event Coverage?

For event organizers, the answer is, "Very important." There's nothing like an incredible prize to reel people into your event and drive engagement with a company or brand, and the higher the level of participation, the more successful your event will be. 

If you’re considering holding an event with a grand prize, Grand Prize Promotions can help with that. To learn more about our options, or to help plan a promotional event, please contact us today.