Over-redemption Insurance (also sometimes called Over-redemption Coverage) is a type of

insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

that is purchased by businesses to protect themselves financially in the event that a

promotion Promotion may refer to: Marketing * Promotion (marketing), one of the four marketing mix elements, comprising any type of marketing communication used to inform or persuade target audiences of the relative merits of a product, service, brand or i ...

ends up becoming more successful than was originally anticipated and/or budgeted for. Over-redemption insurance is commonly used by

retailers Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...

advertising agencies An advertising agency, often referred to as a creative agency or an ad agency, is a business dedicated to creating, planning, and handling advertising and sometimes other forms of promotion and marketing for its clients. An ad agency is generally ...

and brand managers to reduce the financial risk of a running a

marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...

sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

promotion.

How Over-redemption Insurance works

Since it is difficult to predict how successful a company's promotion will end up becoming, unexpected costs can easily accumulate if both the cost and success of the promotion are underestimated. With over-redemption insurance, if a company goes over the promotional budget they had originally planned for, the financial risk of those increased costs gets transferred to the

insurer Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

, thus protecting the company's budget.

How Over-redemption Insurance is rated

Insurance companies rate over-redemption insurance based upon a number of factors. These factors include, but are not limited to: what type of company is requesting the insurance and how long they've been in business, if the promotion is new or being renewed, the duration which the promotion is being held, the target area of the product, the number of

units Unit may refer to: Arts and entertainment * UNIT, a fictional military organization in the science fiction television series ''Doctor Who'' * Unit of action, a discrete piece of action (or beat) in a theatrical presentation Music * Unit (album), ...

sold, the cost per unit, the number of units the company will be using during the promotion, the monetary value of the coupon, whether or not any

advertising Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...

costs are applicable, previous promotions and/or redemptions results, and of course, the desired amount of insurance that the client is requesting. An example of over-redemption insurance would be if a company is running a promotion in which consumers must collect a certain number of proofs of purchase from a yogurt lid in order to receive a $100 prize. The company may predict a 20% response rate (i.e. 20% of all consumers will participate in the promotion and actively collect the yogurt lids). In case the promotion ends up becoming vastly more popular than the company initially intended, they may call an insurance company to purchase the coverage, paying a premium to cover unforeseen promotional costs, if the promotion reaches a response rate above 20%. A company may choose to either purchase coverage for up to the full 100% response rate, from 20–50% response, or coverage as their budget allows. Types of insurance {{insurance-stub