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 typically applied against the net budget; however, note that not all of the insurers rate on net insurable, as was the case a few years ago.
A typical rate might be .70 cents per hundred dollars of net budget, depending on the current insurance market conditions. 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 line items as costs that do not need to be insured:
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 results 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:
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 anything from the insured budget.
As specialized film insurance brokers, we can help guide you to an appropriate net insurable budget for your film production.