One of the simplest ways to reduce film production insurance premiums is to lower the net insurable budget. The net insurable budget is the amount left once various budget line items are removed from the definition of insurable costs. The rate that is negotiated with the insurance company is applied against the net budget.
A typical rate might be .70 cents per hundred dollars of net budget depending on the current insurance market conditionspical rate
To illustrate, let us assume a cable TV movie needs to be insured with a budget of $2,000,000. Typically, we would remove the following lines items as costs that do not need to be insured:
- Story and scenerio - we will assume this amount is $50,000 (I know writers are never paid enough).
- Post Production costs - we will assume this amount is $200,000
Claims that happen during post production are covered; however, due to the low risk of claims in post, the insurance company does not apply rate to post costs which is why it has been removed.
$2,000,000 less script and post costs leaves a net insurable budget of $1,750,000. $1,750,000 times the negotiated rate of .70 reults in a premium of $12,250. If the net were less than $1,750,000 the premium would go down.
Other budget costs to consider removing from our sample budget might be:
- Producer fees ($50,000)
- Development ($20,000)
- Publicity ($5,000)
- Overhead ($35,000)
- 50% of contingency ($25,000)
Removing the above items would lower the net insurable budget by $135,000 to $1,615,000 and would result in a premium savings of $945.
Once the budgeted cost is removed from the net insurable budget it is no longer insured in the event of a claim so producers need to be sure before removing from the insured budget.
As specialized film insurance brokers, we can help guide you to an appropriate net insurable budget for your film production.