What is Insurance?
Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
The company pools clients’ risks to make payments more affordable for the insured.
Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.
There are a multitude of different types of insurance policies available,
But when it comes to outdoor events, there are some specific insurance policies you need to consider:
- Protection of you, your staff, and your business
- Protection of the property and property owner
- Protection of your customers
It may sound complicated, but you will be surprised to find all the insurance that is already in your life.
You can probably guess which ones those are:
- #1 – Health: Your personal health is the usually the first insurance policy you will have
- #2 – Liability: Your car, home, and property follow as policies to protect you from accidents
- #3 – Property: Your car, home, and life usually follow as policies you personally own to protect you or your family from really bad days.
Most of those were insurance coverages that are most often required by law or make a lot of sense to own.
But what about those policies that you need to have when you produce an event.
Some might call this the insurance you need to run a business.
- #1 – When you start a business, this becomes the first insurance policy you consider outside of yourself or your family.
- #2 – Event insurance to protect you, your volunteers, your sponsors, and the property owner.
- #3 – Additional insurance that covers the racers if they are injured above and beyond their own coverage.
Your racing business requires special types of insurance policies that insure against specific types of risks faced by the particular business.
For example, your racing business needs a policy that covers damage or injury that occurs as a result of being outside and required to hike into remote areas.
You may also need some kind of professional liability insurance, also known as errors and omissions insurance if you have to cancel or move your event.
As a business owner — which is what you should be if you are running a racing business — you need to consider a policy that covers both your business AND your event.
But I know for a fact that most race directors are NOT their own business.
So let’s cover Event Only Insurance coverage first.
Event Coverage Example
Let’s say you are holding a one-day event that expects to have 100 racers.
You and your team of 5 volunteers will need to be covered for just this event.
A $500-$600 premium includes:
- Each day of your event
- Volunteer Medical Premium per volunteer
You can then add an additional amount of coverage — typically $1 Million in Excess Liability
This will cost you between $700-$1,000 additional.
Your complete coverage for a one-day event would be: $1,200-$1,600
To get this rate, your insurance agency will require that you show them:
- Your Liability Waiver
- Your Risk Management Plan (i.e. Emergency Response Plan)
In Merchants of Dirt Podcast Episode #28 — Mr. Murphy Loves Your Cut-and-Paste Waiver I told you why waivers are your first line of defense against personal injury lawsuits.
Additionally, in Merchants of Dirt Podcast Episode #14 — Mr. Murphy Just Took Out a Racer I told you why you need to take emergency response planning very seriously when — not if — you need to save a racer’s life.
Your insurance company is not going to be any different.
They are going to DEMAND to know how well you’ve planned out your event and how serious you are about protecting what amounts to their investment into your event.
If they don’t like what they see, they will not cover you — so you need to go back and listen to those two episodes and get yourself prepared before you walk into an insurance agents office.
If you have your waiver and emergency plans ready, then you’re ready to start shopping for a policy.
The more prepared you look, the better your chances for a policy at a good rate.
Why does preparation impact your price?
It does not have an impact on all insurance companies, but it does keep additional costs based on their risk assessment of your event from being added to your policy.
You see, they’re hoping — based on what they know about your kind of event — that nothing will happen.
They are the Anti-Mr. Murphys’ that would like you to make sure nothing happens to you, your volunteers, or the property you’re using.
Most insurance companies that cover races expect nothing to happen.
In fact — they are betting on the chance that NOTHING will happen.
That’s how they make money.
If they insure you, and nothing happens, then they keep all the money.
That’s the deal.
They are so good a predicting the chances of something NOT happening, that their entire business is based on you NEVER collecting on a policy.
They then play those odds of nothing happening with all the other people and companies that also have events.
If one event out of 100 has an injury, they still make money on the other 99, and part of the money collected by the 99 other policies will go to pay out the 1 that collected.
When all is said in done, the insurance company will make money even if they have to pay out.
Business Insurance Coverage
You should be a business if you are running a racing business.
The reason is very simple.
If someone sues you for something that happens at your event — and they WIN — you are personally liable.
This means your own money and assets — to include your investments, cars, and home — could be forfeited in an attempt to pay the damages.
To protect your own family and livelihood, you need to form a business to take on the burden of any legal action.
When your business is sued — assuming you didn’t do anything personally — only the assets of your business can be used to pay damages.
This is where General Liability Insurance comes in.
Every business, even if home-based, needs to have liability insurance.
The policy provides both defense and damages if you, your employees or your events (which could be called a product or service) cause or are alleged to have caused Bodily Injury or Property Damage to a third party.
This is the insurance that covers what most business owners refer to as “slip-and-fall” lawsuits.
When it comes to endurance sports and outdoor events, slip-and-fall is a part of doing business.
Not everyone sues if they do happen to hurt themselves.
I often find that racers are a more hardy bunch and tend to think of injuries as a badge of honor.
But you never know when you are going to get that one person that thinks suing everyone for their own mistakes is perfectly acceptable behaviour.
In the United States — a VERY litigious society — it just makes sense to have General Liability Insurance as a part of your business expenses.
Because General Liability Insurance is almost as common as auto or life insurance, many mainstream insurance companies provide this insurance at a reasonable price.
Often, you will find that an insurance company that covers your business WILL NOT cover your events.
However, it is perfectly acceptable to have multiple insurance policies for different parts of your business.
It would be better if you shopped around and found an insurance agency that covered everything you need under one “Umbrella” policy.
One policy to rule them all could be both convenient and cheaper than multiple policies, but you’re going to have to find what works best for your business.
What does it cost?
It depends on the insurance company and what is being covered.
The bigger your operation, the more expensive this is going to be for you.
If it just you, you might pay $500 per year for general liability insurance.
However, if you hire a few employees and have a good collection of property and gear, you’re likely to pay over $3,000 per year.
The cost of not having it, however, could be the end of your business.
Then what is Sanctioning Insurance?
Sanctioning is a special kind of general liability insurance that covers association events for which a permit has been issued.
This kind of insurance comes with something that some race directors don’t want — STRINGS!
If you want to be an official event based on the rules and regulations governed by a national organization, then you have to play by their rules.
This means an official permit and a requirement to use their general liability insurance to cover your event.
If you’re looking for an insurance policy that covers your event, then sanctioning is a path you can take.
Often, the insurance that comes with sanctioning is not super expensive.
However, it does require you to abide by their rules in course design, officiating, organization, and administration.
If you do not fill out your paperwork in time, have a course that is not up to their standards, or are want to use your own official timekeepers, the national organization can shut you down.
With great sanctioning comes great headaches.
Some race directors do not put on a race without sanctioning.
They see sanctioning as a fantastic tool for race promotion, especially when their event gets placed on a national organization’s calendar, all their members will get points if they race it (improving demand), and can outsource all of their timing needs.
These advantages — to them — outweigh the rigger and extra work needed to gain a national organizations approval.
The key is understanding what you want out of your event.
Do you need national sanctioning?
This has a lot to do with how much money you have to build your event.
If you’re broke, national sanctioning can be a blessing in disguise.
For less than $300, they can provide you with an upfront permit, ready-to-go insurance policy, and even schedule your very own officials show up to your event.
These are golden tickets — the paperwork most venues want to see before they give you a permit to use their venue.
It also will allow you to kick off your advertising and start bringing in pre-registration dollars.
While all sanctioning is different from organization to organization, most don’t require you to pay for the final insurance policy and officials until after the event.
But sanctioning can come at a price.
Sanctioned races require each racer either be a member of the national organization (i.e. paid membership fees) or buy a membership (one day or annual) before you will be allowed to compete.
Some racers avoid sanctioned events due to the extra costs.
Others avoid them due to the policies or political positions of the national organization.
On the other hand, if you do not want sanctioning, then you will have to pay for the cost of your own event insurance up front.
That would require you to pay for your policy long before you can use its final approval for your venue permit.
Be careful to know how much general liability coverage each venue requires.
All national organizations carry enough to meet the minimum requirement for most National and State parks.
Your local insurance agent may not quote you the right price if you ask for coverage that is too low for the venue.
Regardless how you have it set up, having control of your own event insurance policies has everything to do with your overall business strategy.
You either do your own thing, only do sanction events, or do some kind of combination of self-supported and nationally-support events throughout the season.
It can be cheaper to be unsanctioned by keeping a race director’s overall insurance costs down.
But membership does have its privileges.
How do my racers get covered?
One of the biggest points of confusion that race directors have with insurance is how their racers will be protected during the race.
Most races are what is called “at your own risk” kind of events.
This means you — as a racer — understand that what you are about to do is dangerous (hopefully detailed in the waiver you have to sign) and that you — the racer — are responsible for yourself if you get hurt.
Each participant is then expected to have their own insurance coverage that kicks in if they hurt themselves during the race.
A large number of racers expect this and do take care of themselves.
But there is always that one.
That one racer that either does not have coverage or does not have enough coverage for their injury.
Head injuries are perfect examples of a kind of catastrophic event.
This is where you — as the race director — can provide additional insurance that covers the racers if they are injured above and beyond their own coverage.
This is almost always elective — the racer has to ask for it and pay for it — and can be part of your own insurance or the insurance provided through sanctioning.
Many national organizations provide general liability coverage for accidental medical coverage as part of their sanctioning package.
Which also means you pay for it, usually after the event.
For example, USA Cycling charges you $3.50 per racer you have at the start line on the day of the event.
These totals are reported to USA Cycling by the governing officials, and your final bill is calculated based on that total.
If you had 100 racers at the start line that day, then USA Cycling will send you a bill for $350 in addition to your permit and ace officials fee.
This is the coverage that is offered to annual members of an official club or national organization, or required by all participants of an event via a One-Day License.
This way everyone that participates in an officially sanctioned event is covered under the national organization’s general liability insurance.
The reason for this is obvious.
First, it enforces the race organizer to cover of all participants, keeping shady operations from skimping on insurance.
Second, it keeps participants from coming back to the national organization and sueing them for something that happened during the event.
And Third, it provides some sort of medical care for those that do not have proper coverage.
As a race director, you can keep all these costs out in the open and let racers know what they are paying for.
Or you can fold these charges into your overall pricing.
Many race directors elect to do the later — coming up with a final price based on all their expenses and the value they believe is presented in their event.
When you decide to host live events, you invite risk.
Mr. Murphy is the master of catching you without any kind of financial protection, and always at the worst time too.
Be aware of the different levels of insurance that you will need to navigate before you can safely produce an event.
Go talk to an insurance agent.
Heck, go talk to six insurance agents.
Get a ton of quotes, shop around, and find a policy that works for you.
Additionally, do it as a company — not as yourself.
Protect your family and your livelihood by investing in the formation of an LLC or Corporation and give yourself another level of protection.
Finally, I am of the belief that sanctioning can help you bootstrap an event.
When it is all said and done, sanctioning is a means to an end, not a requirement.
But it can help you with obtaining a healthy amount of insurance when you are first starting out.
Sure, it will require you to give up some control, but it can give you a great start that can help you move into non-sanctioned events later on.
One day you will have the resources to pay for your own insurance and staff, especially if it’s a backyard style event that only involves your community racers.
Obtaining a reasonable amount of insurance — no matter how you get it — should always be part of your business strategy.
With that being said, I leave you with this last thought:
Never, never, never direct an event without insurance — ever!
And now you know.
Listen to the Merchants of Dirt Podcast
Merchants of Dirt, hosted by Reckoneer.com founder Kyle Bondo, is dedicated to helping you start and finish successful outdoor events.
Each episode provides you with Kyle’s exclusive, behind-the-scenes perspective that only his 20+ years of producing endurance, trail, water, orienteering, mountain bike, and adventure races can provide.
The result is a show that can help you start a new event, or build a career that keeps you outside for the rest of your life!
Find more Merchants of Dirt Podcast episodes at MerchantsofDirt.com!
Featured Merchants of Dirt Podcast Episodes
Yesterday Is Too Late For Insurance – MOD044
Mr. Murphy Loves Your Cut-and-Paste Waiver – MOD028
Mr. Murphy Just Took Out a Racer – MOD014