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What is the difference between prize indemnity insurance and event contracts?
Both can cover the refunds or prizes a promotion promises. Prize indemnity insurance is a policy: you pay a premium, and the insurer reimburses your business if the covered event happens and its conditions are met. An event contract is bought and sold on an exchange and pays a fixed amount if the agreed outcome happens. Either way, your business honors the promise to customers. They differ in how the price is set and how the money reaches you.
How do they compare?
| Option | What it covers | How it pays | What you pay upfront | Main limit |
|---|---|---|---|---|
| Prize indemnity insurance | Prizes or refunds tied to an agreed event, under the policy’s terms and conditions. | You make a claim. The insurer checks the event against the policy, then reimburses your business. | A premium set by the insurer, based mostly on how likely the event is and the size of the prize. | The premium isn’t returned. The insurer’s conditions and checks apply before it pays. |
| Event contracts set up by Crux | Offers tied to a clear, measurable outcome, such as a team winning a title or snowfall on an agreed date. | A payout follows the agreed event, so there’s no claims process. | An upfront cost that you see before you approve anything. | The upfront cost isn’t returned. Tell us the offer and we’ll confirm what we can protect. |
| Self-funding | Any offer you choose to make. | Your business pays each refund from its own cash. | Nothing, though you may need to hold cash in reserve. | If the event happens, your business carries the full cost. |
Who is on the hook?
With any of these options, your business makes the promise to customers and pays the refunds or prizes. What differs is who pays your business back.
- Prize indemnity insurance. The insurer issues a policy for a premium and pays out if the covered event happens, subject to the policy’s conditions, a law firm that advises on promotions explains. In 2026, Jordan’s Furniture said its insurance company would fund its $50 million refund promise, Insurance Journal reported. Jordan’s paid the premium for that policy.
- Event contracts set up by Crux. Your business honors the offer, as with any promotion. If the agreed outcome happens, the contract pays your business under the agreed terms. Crux sets up and brokers the contract. Crux is not an insurer or counterparty.
- Self-funding. No one pays you back. Your business pays every refund from its own cash.
Event contracts are bought and sold on exchanges regulated by the Commodity Futures Trading Commission (CFTC). According to the CFTC, these regulated exchanges, and the brokers that give access to them, do not take a side in the contracts.
How is the price set?
Prize indemnity insurance. The insurer assesses how likely the event is and sets a premium for each policy. A law firm that advises on promotions reports that premiums may range from about 2% to 20% of the prize, depending mostly on the likelihood of the event and the size of the prize. Restrictions in the promotion’s rules, such as limits on who can take part, can keep the premium down. In a related case, an Idaho jeweler paid a percentage of its sales to insure a snow refund promotion, the Associated Press reported.
Event contracts. On an exchange, buyers and sellers set the price. The CFTC explains that a contract’s price reflects how likely market participants think the outcome is, and that exchanges show bid and ask prices in real time. So the cost of the same protection can change from day to day. With Crux, you see the upfront cost before you approve anything.
Self-funding. There is no price up front. The cost is the refunds themselves, and your business pays it only if the event happens.
With insurance and with event contracts, the upfront cost is not returned if the event doesn’t happen. Jordan’s retired president told the Associated Press that the company had to pay for its insurance whether the UConn teams won or lost.
What happens when the event happens?
Prize indemnity insurance. Your business makes a claim. The insurer checks the event against the policy and then pays. Disputes can happen. In 2020, an Idaho jeweler promised refunds if at least 3 inches of snow fell on an agreed day, the Associated Press reported. The insurer at first declined the claim because the company that verified snowfall for it recorded 1.8 inches, the Bonner County Daily Bee reported. After the store sent more evidence, the reading was revised to at least 3.6 inches, and the store announced refunds of more than $500,000 for more than 300 customers.
Event contracts. A payout follows the agreed event, so there’s no claims process. The CFTC says that buyers are entitled to the contract terms, including how the outcome will be decided and by whom. If the agreed event happens, the contract pays out under those terms. See What is an event contract?
Self-funding. Nothing is checked by anyone else. Your business pays the refunds when the event happens.
A worked example
Make the offer that fills the store. Promise customers their money back if your team wins the title. A contract payout covers the refunds.
| If the team | Contract payout | What it means |
|---|---|---|
| Doesn’t win | $0 | No refunds are due. The $80,000 protection cost still applies. |
| Wins the title | $1,000,000 | The contract payout covers your customer refunds. |
Protection cost: $80,000 upfront
Illustrative example. Terms and pricing agreed upfront.
What are the limits?
- If the agreed event doesn’t happen, the contract doesn’t pay out, and the upfront cost isn’t returned.
- The agreed event may not match your actual loss. A contract pays on the measured outcome, not on your own costs or sales. This gap is called basis risk.
- The payout follows the contract terms and the agreed measurement source, such as a published price or a named weather station.
- Neither insurance nor an event contract changes what your business owes customers under the offer.
- An event contract covers only an outcome that can be measured clearly and is agreed in advance.
When is Crux not a fit?
- Your promotion is a contest, such as a hole-in-one or half-court shot prize. Prize indemnity insurance commonly covers these.
- You want an insurer to stand behind the payout under a policy.
- The possible refunds are small enough to pay from your own cash.
- Your offer depends on something that can’t be measured clearly, such as store traffic.
Related guides
Sources
- Time to Take Your Shot: Prize Indemnity Insurance Edition, Verrill, November 2, 2017.
- March Sadness: 20,000 New Englanders Lose Out on $50 Million in Refunds, Insurance Journal, April 6, 2026.
- A New England furniture store will refund customers if both UConn teams make the NCAA title games, The Associated Press, via ClickOnDetroit, April 2, 2026.
- Understanding Prediction Markets and Event Contracts, Commodity Futures Trading Commission, October 2026.
- Settlement means jewelry shop will give refunds to customers, The Associated Press, via Idaho Business Review, February 12, 2020.
- Clark’s declares victory in snow promo dispute, Bonner County Daily Bee (Hagadone News Network), February 12, 2020.
This guide is general education. It is not an offer, and it is not financial, legal or tax advice. Terms, prices and availability depend on the contract.