In general, weather insurance protects the sponsor of an event or a manufacturer of a product that is dependent on or subject to weather activity. It covers financial loss such as reduced revenue, increased expenses or inventory loss, as well as increased product promotion expense. The policy is most useful for protection against the cancellation of, or diminished revenue from, events such as outdoor concerts, fairs, carnivals, weddings and sporting events. It can also be used as a marketing device. Consider a snow blower company that boost sales by promising refunds if snow accumulation is substantially less than a seasonal average. Weather insurance can also help to stabilize cash flow. For example, it could help a small town when an extreme amount of snowfall substantially increases its snow removal expenses.
There are four basic types of coverage against excessive rainfall for any covered event:
Cumulative Rainfall – Example: A policy provides that, between the hours of 7:00 p.m. and 2:00 a.m. on August 15 and 16, 20XX, no more than 1/10 inch of rainfall will accumulate at the National Weather Service station based at the Indianapolis International Airport.
Consecutive Dry Hours – A specific amount of rainfall that is not to occur each hour for a portion or for all hours of an event is insured. The rainfall amount is generally smaller than the cumulative rainfall coverage (1/100 or 2/100 inch of rain).
Non Consecutive Dry Hours – A specific amount of rainfall that is not to occur each hour for a portion or all of the hours of the event is insured. The insured dry hours may occur at any time during the covered event.
Extended Period – This term is used when the coverage period is for more than one day. Extended period coverage is a combination of Cumulative Rainfall, Consecutive Dry Hours and Non Consecutive Dry Hours coverage.
Other types of weather-related insurance are available to cover sponsored events, including:
Snow Insurance – Provides coverage against any measurable amount of snow during a specified time period.
Wind Coverage – It either covers against loss from higher or lower wind velocities compared to the average velocity over a three-hour period or against the fastest mile per hour wind speed.
Temperature Coverage – Insures against loss caused by maximum, minimum or average temperatures during specific hours, days or weeks.
Sky cover/sunshine – Provides coverage if designated percentages of cloudiness or sunshine during specific times on a specific day or dates is not reached.
Severe weather causing cancellation – Provides coverage if some described weather condition occurs within a specific time and/or date.
A Weather policy only covers loss of income or revenue from the specific event. It is intended to restore a party to the financial condition that would exist had no loss covered by the Weather insurance policy occurred. Is your event or business “under the weather?” It may be worthwhile to contact an insurance professional and discuss whether Weather insurance could make things better.