Jordan’s Furniture has been advertising a promotion: If you bought furniture from them and both UConn basketball teams get to the championship game your furniture purchase is free! Brilliant! But now it looks like it might happen and it’s likely to be an expensive gamble if it does.
One of our clients asked the astute question: Can you insure that?
Absolutely! Specialty insurers will calculate the odds of the likeliness that it will happen well ahead of the event and come up with an payout amount and base a premium on that. For example, if on Dec. 1st they figured that had a 5% chance of happening and lets say $1m of furniture was being covered they’d charge maybe $50,000 plus administrative costs, profit, etc. Whether it happens or not Jordan’s has paid the premium. The insurer is on the hook. This is pretty common. Hole-in-one insurance in golf tournaments is another example.
And, yes, we can do that.
#UConn #JordansFurniture #insurance #HoleInOneInsurance
