Prize Indemnity Insurance
Prize indemnity insurance is a purchase that would be considered by someone offering a large prize and thus could stand to lose a considerable sum of money. This form of insurance would mean that they don't actually need to have a huge sum of money ready to pay for the prize, but rather the insurance pays out if a prize is awarded, and so the promoter simply pays the premium: which of course could itself be very hefty.
Typically a large prize is awarded for something that is considered very unlikely: let's say you offer a prize of a hundred thousand pounds at a fete to someone who can roll 6 dice and get a 6 on every dice. The chance of this happening is 6^6, or 1 in 45,656. If you don't have the money in the bank, then you could potentially look into having prize indemnity insurance set up for the eventuality that someone won the prize.
Clearly with this sort of insurance it is all about assessing the chance of someone winning, which depends on the number of people who are eligible to enter for the prize (in the case above, the number of people who take part), their skill level (not relevant here, but very relevant in something like a competition to shoot an arrow and hit a pea). Clearly it is not normally the case that the chance of something happening is precisely known such as with the dice rolling above, so this is where skill at assessing comes into play.
The higher the chance that someone will win the prize, then of course the higher the premium would be to purchase the insurance. If the odds are not sufficiently high, or not assessed to be sufficiently high, then it would be difficult to purchase prize indemnity insurance.
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