By Jack O' Connor:
A stark reality for many of the best prospects in college football is that some may never get the chance to economically capitalize on their talent. Football is an inherently violent sport and each player risks serious injury on every play of every game. As a result, more and more players are looking for extra protection to make it through three years of college football and achieve their NFL dream. This protection is now coming in the form of loss-of-value insurance policies for an increasingly large number of athletes.
Insurance policies for student-athletes are not a new phenomenon but the details of the policies have evolved rapidly in recent years, making them much more common. Less than a decade ago, the only viable option for a football player looking to protect his worth in case of an injury was a total disability insurance plan. Currently, the NCAA offers these plans, known as permanent total disability (PTD) coverage. These plans protect a player if they suffer an injury or illness that prevents them from ever playing their sport professionally [1]. Most athletes with professional aspirations have a policy of this nature. Loss of value insurance operates as an add-on feature to these policies. It allows elite players to collect money if they suffer an injury that causes their projected draft position to fall [2]. The NFL rookie pay scale is contingent upon the order in which a player is drafted. As such, falling from the first to the second rounds can have massive implications on the value of an athlete’s first contract. Both insurance companies and the NCAA only recommend this insurance for potential first and second round picks and the claims can range between $1 million and $10 million dollars [3].
These payouts, though rare, are quite substantial. Naturally, so are the premiums. According to Keith Lerner, who writes these policies for players at his firm Total Planning Sports Services, the premiums are approximately $10,000 per million of insurance [4]. So how are these policies affordable to student-athletes? There are two ways. Since the players purchasing these policies are all in the highest tier of the sport, many insurance plans will allow them to borrow against their future earnings [5]. This method allows the player to receive protection before the draft and repay the insurance provider after he signs his contract.
The other option is the player’s university covering the costs. This scenario has become very common since it was deemed to be consistent with the NCAA’s policies. Every major collegiate athletics program has a Student Assistance Fund of money they are allowed to use on players for emergency situations such as a flight home for a funeral. Universities can also use that money to cover the costs of loss-of-value premiums [6]. This is a win-win for both sides. The players can get protected without paying out of pocket or incurring interest on a massive loan and the universities can use the offer to pay to entice elite prospects to come to their university and even possibly stay an extra year at school.
These policies are becoming more well-known due to recent injuries and headlines. One notable story was the injury Oregon’s cornerback Ifo Ekpre-Olomu suffered in December of 2014. Ekpre-Olomu was one of the most coveted prospects leading into the NFL Draft. That is until he tore his ACL at practice just days before his final collegiate game. He fell to the seventh round and collected $3 million in lost value [7]. This is a far cry from what he could have potentially earned had he not been injured but still better than nothing. These policies will continue to grow and evolve. More recently, Chance Warmack, an offensive lineman for the Tennessee Titan became the first NFL player to collect a loss-of-value claim because he second contract was lower than expected [8]. This variation of the policy protects players who are already in the league if they suffer injuries or simply do not perform at the level they expected.
Football players risk everything to do what the love and make a living while doing it. It makes sense to create policies that make risk at least marginally more reasonable. These policies will not replace everything injured players lose but it is at least a safety net for those worst-case scenarios that end and alter careers on a fairly regular basis.
[1] NCAA, Loss of Value Insurance Information, NCAA.org, http://www.ncaa.org/about/resources/insurance/loss-value-white-paper.
[2] Darras Law, Athletes or Universities Buying Loss of Value Insurance? What You Should Know, Darras Law Firm, https://www.longtermdisabilitylawyer.com/2017/04/questions-ask-buying-loss-value-insurance/.
[3] Staples, Andy, Man coverage: How loss-of-value policies work and why they’re becoming more common, Sports Illustrated (January 18, 2016) https://www.si.com/college-football/2016/01/18/why-loss-value-insurance-policies-becoming-more-common.
[4] Id.
[5] VanHaaren, Tom, How athletes get insurance and figure our what their bodies are worth, ESPN (September 7, 2017) http://www.espn.com/college-football/story/_/id/20592832/how-college-football-players-get-insurance.
[6] Id.
[7] Staples, Andy, Man coverage: How loss-of-value policies work and why they’re becoming more common, Sports Illustrated (January 18, 2016) https://www.si.com/college-football/2016/01/18/why-loss-value-insurance-policies-becoming-more-common.
[8] Rovell, Darren, Chance Warmack first NFLer to collect on loss-of-value insurance policy, ESPN (July 26, 2018) http://www.espn.com/nfl/story/_/id/24202598/chance-warmack-1st-nfler-collect-loss-value-insurance-policy.