Contingency insurance protects people and businesses from litigation due to a canceled event or other services. In some cases, a cancellation can mean losing thousands of dollars in refunds and other costs that might bankrupt the business. Contingency insurance covers organizers against unforeseen events.
For example, insurance protects against a specific natural disaster like a flood or an earthquake that destroys the venue where the show would have taken place. With contingency insurance, everyone who would have worked during the show but couldn’t still get paid.
In fact, in the past three years, contingency insurance has taken on an entirely new meaning as the beginning of the pandemic caused thousands of event cancellations country-wide and worldwide.
What Are the Possible Reasons for Contingency Insurance?
Businesses that provide services to customers and other businesses must understand what “risk” does to their finances. If a business makes a deal to do “such and such,” it must understand what canceling “such and such” could do to the business’s bottom line.
Concert promoters and event organizers are among the most vulnerable. Knowing the potential risk beforehand saves money, especially if you planned for the risk and are prepared in case something happens that makes holding that event unmanageable.
What Other Types of Insurance Are Necessary?
Contingency risk insurance is only some of the policies needed in this day and age.
Homebuyers must buy property insurance as a contingency of their escrow. Therefore, new homeowners had better be sure they can get homeowners and property insurance before they start looking.
Adverse judgment and preservation insurances are contingency insurance plans specifically addressing litigation. Adverse judgment protects businesses and people from an outcome that harms the plaintiff, usually for people currently in court. Judgment preservation makes sure the case’s final judgment stays intact.
Although categorized individually, flood and earthquake insurance coverage depend on the natural disaster. In these cases, the potential homeowner must get insurance for the region’s natural disasters.
Some have used insurance to keep a business running long enough for something else to happen. Corporate attorneys understand how to use contingency insurance to maintain business continuity as a business recovers. The insurance industry helps by supporting stopgap insurance add-ons as part of a business continuity plan.
Insurance companies pay out according to the terms in the contract, and they carry the risk as a “what if” everyone hopes won’t happen. People want to avoid going to court, so insurance companies usually try settling a court case and avoid courtroom time. Technically speaking, contingency insurance can be used for anything that stops a business from functioning, well, almost anything. The event must be out of the control of the insured.
What Are the Benefits of a Contingency Insurance Plan?
There are many benefits of contingency insurance. Staying out of court is the main one. But, there are others. Another main benefit is avoiding any risk that might get in the way of doing regular business. Additionally, contingency insurance is “extra” insurance on top of other insurance. For instance, homeowners insurance needs a contingency clause in case the buyer can’t get insurance.
Frequently Asked Questions
How much does contingency insurance cost?
The cost depends on the risk. A homeowners contingency rider should be considerably less than hosting a major band for a concert. That said, costs are different depending on where you go. Shopping around with some comparisons.
What can contingency insurance be used for?
Basically, if you can prove the case, you can probably get an insurance company to write the policy. But remember, contingency insurance doesn’t replace other insurance plans. It’s an add-on, or in some cases, a negotiated deal between the companies.
What happens if I don’t qualify?
Thousands of independent insurance agents throughout the U.S. want to talk about your insurance. Barring any drastic situation, anybody qualifies for some insurance. It depends on your individual insurance needs and the risk.
What’s the difference between contingency insurance and a contingency plan?
Sometimes big companies and estates need contingency plans just in case something drastic happens. Contingency insurance isn’t a plan. It’s something that’s part of a bigger plan. Both happen in some cases, mainly if the company owner dies. Something should be in place so the business keeps going.