A HOLE-IN-ONE happens rarely enough. Throw in a $1 million prize, and the odds against it are even greater. Yet every once in a while, some lucky golfer can strike it rich.

“They do happen,” says Tanya Mathis, marketing manager for Dallas-based SCA Promotions, which has paid off on more than one $1 million shot over the years. “It's part of the business.”

Hole-in-one contests have become golf tournament staples, precisely because of the excitement inherent in golf's most spectacular accomplishment. “It's virtually a standard inclusion when we organize a charity event,” says Nina Renaud, co-founder of Corporate Golf, a golf equipment and event services provider in Durham, N.C. “In terms of corporate events, it's not universal, but it's common.”

The major expense in putting on a hole-in-one contest is the amount the insurance will cost to cover the potential payoff, usually a couple of dollars per player, according to Renaud. “That varies depending on a number of factors, including the number of players, length of the hole, and the value of the prize you are offering.”

Andy Dunn, tournament support account executive for Atlanta-based American Hole 'n One, says insurance rates start at $225 for prizes of more than $5,000, and increase as the jackpot increases. According to Mathis, insurance costs generally run about 2 percent to 4 percent of the total prize package.

The contracts signed with the event holders are “very specific,” Dunn says, in order to avoid the slightest bit of controversy. Contracts detail the number of players involved in the contest, the exact yardage of the hole involved, and the precise value of the prize. Two witnesses need to be stationed at the hole, and any contest with prizes of more than $200,000 must be videotaped. “Our payout percentage is remarkably high because we do a good job of explaining our policies and procedures,” Dunn says.

American Hole 'n One, which advertises itself as America's premier provider of hole-in-one insurance coverage, handles thousands of contracts a year and pays out on 20 to 30 winners a year, Dunn says. According to Mathis, the odds of a golfer holing a shot from 150 yards is between 10,000 and 15,000 to 1.

And while paying off winners may dent an insurer's bottom line, Mathis says without winners there would be no business in the first place. “We want winners,” she says. “People can win — and they do win. It's exciting when you get a really neat claim. … And it's even better for our clients.”