Often a fan favorite, promotional contests at sports games are a thrilling way to watch “Joe Six Pack” attempt the seemingly impossible feats that professional athletes make look routine. Popular contests include the hole-in-one golf drive, the half-court basketball shot, and college football’s iconic Dr. Pepper Tuition Giveaway. These are prime examples of these high-stakes moments that captivate fans and add an extra layer of excitement to the game-day experience.

Promotional contests found themselves in the limelight early this college football season. At an August 31 football game between Purdue and Indiana State, Purdue University student Zachary Spangler won the “Kicks for Cash” contest – or so he thought. In the promotional contest sponsored by Rohrman Automotive Group, a student has 30 seconds to kick a 20-, 30-, and 40-yard field goal for a chance to win a two-year car lease. Spangler nailed field goals from all three distances. However, days later, he was informed that insurers reviewed the film of the contest and determined that Spangler kicked the last field goal a fraction of a second too late, disqualifying him from the two-year car lease grand prize.

What followed was a college football drama worthy of a made-for-TV movie, with Purdue’s student newspaper rallying behind Spangler and offers pouring in from other dealerships and local businesses to compensate him. Eventually, Rohrman Automotive Group stepped in and offered Spangler $5,000 in cash, which he accepted. While it remains unclear if the insurance company played a role in the final settlement, the insurer’s decision to scrutinize the footage set the entire chain of events in motion, highlighting the often unseen but crucial role of prize indemnity insurance in sports promotions.

Most fans are unaware that an entire industry operates as the proverbial “man behind the curtain” quietly financing beloved promotional contests that add excitement to live sporting events. The industry offers a special type of insurance called prize indemnity insurance. Prize indemnity insurance is a unique type of coverage that allows organizations to offer extravagant, attention-grabbing prizes as part of promotion contests without bearing the risk if someone wins. Coverage can apply to all sorts of contests with large cash payouts, car giveaways, or all-inclusive tropical vacations.

One of the most well-known forms of prize indemnity insurance is hole-in-one insurance, frequently seen in golf tournaments. Sponsors often promise luxury prizes for participants who make the rare hole-in-one shot. Rather than risking the cost of paying out expensive rewards themselves, sponsors take out this insurance to cover the prize if someone achieves the feat. This behind-the-scenes safety net allows for the excitement and buzz fans love without the risk for the event organizers.

The premium paid for prize indemnity insurance is calculated based on the insurer’s expected loss plus a markup to cover operating costs and profit. The expected loss is simply the prize payout multiplied by the probability of winning. For example, in the 2014 Dubai Desert Classic golf tournament, a $2.5 million prize was offered to the first player to sink a hole-in-one on the 17th hole. According to EQ Group, the odds of a PGA Tour golfer nailing a hole-in-one is approximately 1 in 3,000. Therefore, the expected loss from exactly one golfer attempting this shot would be about $833. In the 2014 Dubai Desert Classic, there were 129 professional golfers meaning that the chance that at least one of them would make a hole-in-one was around 4.21%. Therefore, the expected loss over the entire tournament field was $105,238.70.

In addition to covering the expected loss, insurers normally add a markup known as a loading factor which is a small percentage of the prize value to cover operating costs and profit margins. In 2012, ESPN reported that prize indemnity insurance giant SCA Promotions usually charges between 3-15% of the prize value depending on the odds of winning a particular contest. This figure includes both the expected loss and the loading factor.

ESPN also notes that a contestant with “a decent leg” has about a 5% chance of making a 40-yard field goal, which was the case in Purdue University’s “Kicks for Cash” promotion. Given this higher probability compared to a hole-in-one contest in golf, it is likely that the Rohrman Automotive Group was paying a premium closer to 15% of the “Kicks for Cash” prize value.

According to Mark Giltman, owner of Hole In One International, in an interview with The Hustle, when someone wins a promotional contest, insurance companies typically seek sworn affidavits from event witnesses and conduct an investigation to ensure that all contest rules were followed. Insurance companies often have to be meticulous about the rules, and the “Kicks for Cash” incident earlier this year is a good example. Prize indemnity insurers thrive on making these contests exciting, but if too many winners emerge, the business would face unsustainable payouts.

In the end, prize indemnity insurance ensures that contests remain a staple of sporting events, bringing excitement and engagement to every shot, kick, or throw. Without it, the sports world would miss out on countless memorable moments—and fans would miss the chance to witness ordinary people do the extraordinary.