In the high-stakes world of professional sports, where a player’s entire career can come crashing to a halt with a serious head injury or the tearing of an ACL, disability insurance is essential. But at many points throughout an athlete’s career -- such as when they’re between contracts, or about to enter the draft -- they will need a different type of targeted coverage for a short, defined period of time.
Just about anyone can qualify to buy short-term disability insurance when they’re looking to protect themselves against loss of income during specific periods of time. For professional athletes, who face a high risk of injury and stand to lose significant potential earnings during vulnerable points in their career, short-term disability is a highly specialized facet of underwriting that requires deep industry knowledge of secondary markets.
When short-term disability is needed
When there are tens, or even hundreds, of millions of dollars on the line, athletes can’t afford to simply hope for the best. They need to plan ahead.
For example, when a star basketball player with NBA prospects finishes his last collegiate game, he doesn’t walk off the college court and suddenly start playing point guard for the Celtics and endorsing Nike on TV. There’s a process. There are months between the last game and graduation when he’s eligible to hire an agent. There are months between getting an agent and applying for the draft. There are months between the draft and signing with a pro team.
What happens if he blows out his knee or gets in a car accident before he signs the dotted line?
Short-term disability insurance can be written to cover an athlete for any injury that precludes him or her from signing a contract for a specific dollar amount. How much should that dollar amount be? The insurer needs the right tools to assess whether the athlete is more likely to get a three-year contract for $15 million or a one-year contract for $3 million.
Another scenario where an athlete needs short-term disability is the tail end of a multi-year contract that’s about to expire. If a player knows there’s a high likelihood that he or she will sign a new contract at the end of the year, we can insure that player will be covered against the value of the next contract in the months they’re finishing out their current contract.
These risky time periods apply to just about any sport from ice skaters hoping to go pro, to volleyball players with lucrative product endorsements in the works.
How much is covered?
Because the stakes for professional sports are so high – the average salary for an NBA player for the 2018-19 season was $6.5 million – insurance companies are incentivized to write short-term disability policies and have invested heavily in computer modelling that can predict potential earnings.
Nothing is left to chance. Statistical analyses of vast databases that run sophisticated algorithms take into account everything, including league trends, salary history, positions played, age, height, health, etc., in order to predict where a player will get signed, the dollar value and length of a contract, and even which team the next contract will most likely come from.
However, only a handful of carriers write high-value short-term disability. Brokers need a working knowledge of secondary markets like Lloyds of London, as opposed to the standard markets for big national carriers like MetLife. And then, each contract must be tailored specifically for each individual athlete.
Defining disability
As with any individualized policy, details and language matter in figuring out what limits to carry and how a policy pays out.
An important aspect of short-term disability are the provisions that define disability. Sometimes an athlete has an obvious injury which prohibits him or her from playing. Other injuries can’t be seen in an x-ray. In addition to defining language around what can be considered disability, provisions in the contract need to specify who will make the diagnosis.
Brokers in this specialized field need to make sure all the possibilities are covered and that all the iterations are spelled out in the contract.
Whether an athlete is facing a two-week, or an 18-month time period where an injury or accident could derail the chance of a highly lucrative contract, they should make sure their future is covered by short-term disability insurance. To speak with a specialized broker, contact us at jbergstein@risk-strategies.com.
