When Duke University basketball star Zion Williamson’s shoe blew apart on the court and left him with a sprained right knee, questions immediately arose about whether the freshman should consider sitting out the rest of the season or even leaving college to prevent an injury that could jeopardize his professional career. He is likely to be a No. 1 NBA draft pick.
To keep their players in the classroom and in the game, some colleges purchase what is known as “loss of value” or “loss of future income” athlete insurance on behalf of their elite athletes. Athletes themselves also can buy the coverage. Only available as add-on coverage to a permanent total disability policy, it protects star players against loss of future earnings if they sustain catastrophic injuries during their college careers.
To establish policy values, insurance underwriters study the market carefully. For sports such as basketball and football, they look at the players likely to be drafted in a certain year. They consider what positions the athletes play, how the athletes compare to one another, in what round they are likely to be drafted, and how valued each position is during the given draft year.
Based on the market research, an insurance underwriter sets the value for the disability policy as well as for the “loss of value” rider. That payable value is a percentage of the total projected earnings, not the full amount. The policies aren’t meant to completely compensate the athlete, but rather to provide partial financial reimbursement from the injury.
When I was the starting center for the University of Michigan football team, insurance coverage was the last thing I wanted to think about. I was overwhelmed with all the information I was getting from athletic department personnel, agents and advisors. Today, my job at Hylant is to make the process of protecting a player’s professional worth easier for student athletes, their families and their schools.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.