January 2006
Cheat Sheet: Cancellation insurance
Hurricanes, fires, terrorism and any number of unexpected factors can force a show cancellation. Here’s what you need to know before buying cancellation insurance.
By Linda C. Chandler
Do you need event cancellation insurance?
The answer is yes, if …
• The net profit from your event is such a substantial portion of your revenues that losing it would force severe operational changes.
• You can’t afford to absorb the loss of already expended dollars related to a cancelled event.
• You’re contractually obligated to return certain revenues — for example, exhibitor fees, sponsorship money — if the event does not occur.
• The event is scheduled in a precarious location for the timing of the event, for example, hurricane season in Miami, blizzard time in Buffalo, earthquake zones any time.
Comparing services
Submit your substantiated projected revenues and expenses with the date and location of your meeting to two or three brokers to get quotes.
Research potential carriers’ financial backing and Standard & Poor’s ratings.
Read the fine print to learn what’s considered basic coverage and what may be included as optional coverage. One company may boast of an additional coverage, but a second company may have the same or better coverage in its basic package.
Ask for a personal presentation so you can ask questions. Don’t be satisfied with faxed proposals.
Insurers may have a minimum premium ranging from $500 to $1,500. Find out what’s covered for the minimum rate.
Negotiate. If you have multiple events to cover or can buy other insurance products (such as liability insurance) at the same time, you may be able to group them to get a better deal on everything.
After you sign up, be sure you have the name of someone to call — not just an 800 number — if a problem or question arises.
How much will it cost?
Event cancellation premiums generally range from 0.5 percent to 3 percent of the total event revenue and expenses, depending on the loss exposure to be covered and the location and time of the event.
When to purchase coverage
You can purchase cancellation insurance as little as 30 days and as much as two years in advance from most carriers, but most organizers purchase insurance 12 to 18 months in advance. Coverage is bound when the premium is paid. Earlier purchase protects against rate increases caused by market or world events.
What’s usually covered?
It covers financial losses (expenses, lost revenues or both) due to contingencies that are beyond the organizer’s control, generally, but not always, including:
• Weather events
• Damage to the venue
• Labor disputes/work stoppages
• Power blackouts
• National days of mourning
• Failure of principal speaker to appear
• Loss of property in transit to or from an event
• Loss of door receipts
• Justifiable reduced attendance (SARS)
• Interruption, postponement or relocation expenses
• Extra expenses incurred to mitigate or avoid loss
Linda C. Chandler is a freelance writer/editor based in Tyler, TX. She has written for association and convention publications for 17 years. She served as Director of Publications and Editor of Meeting Professionals International’s magazine.
Contact her at linda.chandler@earthlink.net.
You’ll find exclusive Web-only content, including:
Coverage against terrorism
The 9/11 attacks changed event cancellation insurance. Now terrorism is usually excluded from basic policies but optional terrorism coverage can be purchased in degrees.
• Limited coverage may restrict the time or distance from a terrorist event.
• Full coverage may protect against a declared terrorist event that prevents attendees or exhibitors from traveling.
• Fear of travel because of terrorism is not covered.
• Maximum coverage limits may apply to terrorism riders.
How to make a claim
• The burden of proof is on the insured.
• Usually independent adjustors handle claims. Get information to the adjustor as quickly as possible.
• Document not only expenses and losses for the covered event but also histories of previous events to substantiate loss claims. You may need histories for the previous five years or previous five events.
• Provide evidence of attendee and exhibitor requests for refunds.
• Supply copies of contracts with vendors, speakers or sponsors that may entail refunds or losses.
• Present proof of expenses incurred to salvage, reschedule or relocate an event, such as printing new brochures or making new site visits.
• Document attempts to relocate or reschedule even if the attempts were futile because venues were unavailable.
Tips from our experts
• Keep meticulous expense records and budget projections. Know where you stand financially.
• Use resources such as weather Web sites and the Homeland Security site to stay informed about potential threats to your event.
• Stay in constant touch with your insurance representative if a cancellation or move seems likely. Ask “what if” questions.
• Have back-up plans for on-site and relocation emergencies.
• Discuss major decisions with your industry partners and bellwether clients before making general announcements.
• Get out of crisis mode as quickly as possible.
• Re-examine your cancellation insurance at least annually.
What usually isn’t included in basic coverage
• Anything within your control, such as contractual disputes with venues or other legal disputes
• Financial default of vendors
• Low attendance not attributable to covered contingencies
• Nuclear accidents or attacks
• War/chemical/biological hazards
Frank Boeser, CEM, Canon Communications, (310) 445-4200 • Eileen Hoffman, AON Association Services, (800) 424-8830 • Daphne J. Meyers, CMM; Red Barn Group, (701) 347-0142 • Stephen F. Mona, CAE, Golf Course Superintendents Association of America, (800) 472-7878 • Steve Pererlini, HCC Specialty Underwriters Inc., (800) 927-6306.
|
