Hole-In-One Insurance

Hole-in-one insurance is a type of price-indemnification coverage. It’s named for insurance taken out by golf-tournament sponsors that run contests offering big-ticket prizes to one or more contestants who make a hole in one on a single try.

This type of insurance is not limited to golf, however. Hole-in-one insurance also applies to sports leagues and retailers that offer similar contests with grand prizes such as Hawaiian vacations, new cars, cash or free merchandise.

For the insured, the cost of this type of product is far less than the unlikely, but large expense of paying a grand-prize winner.

Tournament sponsors love the draw of contests offering everything from vacation homes to luxury yachts. However, most do not want to actually pay a winner who happens to pull off a seemingly impossible feat.

This is where hole-in-one insurance comes in. It turns the cost of running such contests into a set dollar amount from the sponsor’s perspective.

The cost of hole-in-one varies widely, based on the number of tournament participants, the odds of pulling off the seemingly impossible, and the prize value. For golf contests, a $200 premium for a 100-player tournament might cover a $10,000 prize, while a $50,000 prize for the same number of players might come with a $1,000 premium. In addition, the premiums depend on whether the participants are amateurs or professionals.

Typically, only very large insurance companies offer hole-in-one insurance. Also, they do so sparingly, as hole-in-one insurance is fairly rare. However, some insurers like this business, as they keep the premium if no one claims the prize, the same way an auto insurance policy keeps the premiums of customers who don’t have auto accidents.

New England-based retailer Jordan’s Furniture, a unit of Berkshire Hathaway, regularly makes use of hole-in-one insurance for its annual sales promotions. For example, the company offered a promotion in 2007 offering full refunds for all furniture purchased by customers between two set dates on the calendar, provided the Boston Red Sox won the World Series that year. Indeed the Red Sox won in 2007, and about 30,000 customers who took part in the promotion received refund checks for the value of their purchased merchandise. Hole-in-one insurance paid for a large percentage of those refunds.

Jordan’s runs a similar promotion pretty much every year. For example, in 2018, the retailer offered furniture refunds to customers who made purchases between March 28 and May 20, provided the Red Sox pitched a no-hitter in any of 64 games on the schedule between July 17 and October 1.