Summer is a time for concerts, weddings, fairs, fundraisers, car shows and many other special events. Insuring these events has become more complicated. Most of us are familiar with writing the general liability, liquor liability and even the participant liability. How often are we thinking about what happens if the event is canceled?
What happens if the event is rained out, or a performer cancels? What financial loss could the insured suffer? Who should have event cancellation or weather insurance? In this blog, I am going to talk about weather insurance and, specifically, cancellation due to rain.
What does weather insurance protect against?
Weather Insurance is designed to protect against extra expenses involved with weather or loss of profit caused by weather conditions. Insurable weather perils include:
- Severe Adverse Weather
A few sample target classes are;
- Film Shoots
- Golf Tournaments
- Retail Outdoor Sales
- Special Events
- Sporting Events
What are some of the considerations for cancellation due to rain?
The location, date(s) and hours of coverage are the primary factors in obtaining a quote.
One thing to keep in mind is that the hours of coverage and the hours of the event may differ. Fewer insured hours reduce the cost of the coverage.
The insured may want to include hours preceding the event time and not the hours towards the end of the event time. For example, a daylong event, coverage may be written for 10 AM – 2 PM for $20,000 and from 6 PM to 9 PM for $50,000. There can be a combination of limits or 1 limit. They might also want to do more than just the peril of rain.
When choosing rain as a peril, there are two methods.
One is accumulated rainfall – the amount of rain accumulating during the insured hours would be selected.
The insuring agreement might read: “Caused by an accumulation of ¼(.25) inch or more of rain during the insured hours of 1 PM to 5 PM on July 4 for a parade located in Madison, WI with the weather monitored by the Government Weather Station at Madison, WI. In this example, accumulated rainfall during the 4 hours would have to reach or exceed ¼” (.25) for coverage to apply.
The other method is rain-free hours.
The more hours that are insured, the higher the premium. The lower the amount of rainfall, the higher the premium. Questions to ask include;
- How much rain would have to fall before the event would be canceled?
- When would this have to occur?
How do you establish limits?
These are based on fixed expense, projected revenues and anticipated profits. What would the insured lose if they had to cancel the event due to the covered peril?
Other important items that are of note.
Who monitors the weather?
The insured has the option of either using the closest national weather station with the necessary data for the peril being insured or an independent weather observer. Most national weather stations are often located at or near airports. If the event is on the other side of town, the recording might not be as favorable to the insured. They may want to hire an independent weather observer.
How is coverage bound?
For weather cancellation insurance, most companies require binding at least seven (7) days prior to the effective date of coverage. A completed application with the exact terms of coverage as offered along with the check for the full amount (premiums are fully earned) would be needed for binding.
Information that should be included is;
- the complete insured name and address as it should appear on the policy,
- the limit of insurance for each day of coverage,
- the selected peril options and
- the claims verification choice – national weather station or independent weather observer. (If independent weather observer, some companies have a qualification form that is required at binding)
This is just one of the types of uses for weather insurance. There are of course, many more. What types of risks have you obtained weather insurance for lately?
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About the Author : Terry McFaul, Manager of Training and Development
Terry McFaul joined J.M. Wilson in 1984. She is responsible for the training processes for J.M. Wilson Associates. She works with Managers to develop training that is needed in their departments. She also creates and maintains various quote forms and worksheets used in day-to-day business. She loves the people that she works with and enjoys when an individual learns a process he or she has been working on. Outside of the office, Terry likes to read, play mind challenging games, cook, and learn to play the accordion.
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