Protective insurance policies now norm for top college prospects
When Ohio State guard
So about a month ago, Turner bought a policy through a program run by the NCAA that will pay out should he suffer a career-ending injury and never make it to the NBA. That helped the likely 2010 first-rounder eliminate any nagging worries as he prepares to play for Team USA in the upcoming World University Games and lead the Buckeyes to the NCAA tournament for the second consecutive season. "It's just a little comfort," Turner said.
These days, almost every collegiate player with a chance to be drafted into the NBA or NFL seeks that comfort in the form of a policy either through the NCAA program or through a private insurance agent.
Eleven years ago,
Most players in their prime refuse to consider a career-ending injury, but those who turned down NFL millions to return to college for the 2009 season knew an insurance policy was a must. Whether they got it through an NCAA program for exceptional players or through a private agent, few, if any, players who expect to be taken in the early rounds of the 2010 draft haven't already bought a policy.
"I'm not sure there is anybody who is drafted on the first day that doesn't have an insurance policy," said Lerner, who writes 50-60 policies a year just like the one he wrote for Chester. "It's that big of a business."
It wasn't so big in 1992 when Lerner wrote a policy for Miami quarterback
By the time Chester took out his policy, many potential first-rounders purchased insurance either through the NCAA -- which started its program in 1990 -- or through private agents shortly before their final year of college. Now, Lerner said, some of the best players will buy insurance the spring after their freshman season. "Typically, that would be a sophomore who is a very highly ranked player who is probably going to leave after his junior year," said Lerner, who insured several 2009 first-rounders, including a top-five pick. "So he takes out a policy for two years."
Three 2009 first-rounders, Northern Illinois defensive end
One high-profile player who chose to return to school this year had an advantage. His father makes his living selling insurance.
Citing client confidentiality, Kent Bradford declined to comment on whether Sam had bought a policy, but he did offer a few tips for players who find themselves in a similar situation. Bradford suggested players disclose every previous injury, no matter how minor, because companies will void policies if an earlier injury wasn't disclosed. Bradford also suggested players make sure they understand completely what must happen between an injury and a payout. "I would highly recommend the player or the player's representative thoroughly understand the exclusions, coverage triggers, rehab requirements, and waiting periods before purchasing the coverage," Bradford wrote in an e-mail. "With today's medical technology, there are very few injuries that result in a player never being able to play again."
Bradford considers a policy a "business expense" for a player who intends to play football for a living. Just how costly that expense is depends on where the player buys his policy and how much protection he needs.
Using a private agent, a player can expect to pay $9,000-$10,000 per $1 million of coverage, Lerner said. In other words, a $5 million policy would cost $50,000.
Despite that discount, however, some players still prefer working with private agents. The $5 million policy is the maximum the NCAA offers, and most potential first-rounders want more coverage. This year, Lerner's firm wrote policies for as much as $15 million. Though Lerner never reached that number, he did write some eight-figure policies. Lerner said he typically determines policy amounts by using the contracts of the previous season's draftees to calculate the amount of guaranteed money a player might expect to receive after taxes. That means Lerner's maximum probably will increase soon. Former Georgia quarterback
Lerner also said buying a policy through a private agent allows players an easier transition to professional disability insurance. "As soon as his college policy ends, we can move him into a pro policy," Lerner said. "If there's ever a question come claim time, he was with the same company college and pro. So there's a history, and there's no gap in coverage. And that's key."
Still, buying a policy through the NCAA might be a better option for some. The NCAA offers policies to athletes in football, men's and women's basketball, baseball and hockey. Sheely said football players comprise 80 percent of the 100-120 athletes who buy policies every year. By obtaining a policy through the NCAA, those athletes eliminate one potentially tricky step in the process.
For policies purchased through the NCAA or through private agents, the premium must be paid immediately. Since most players' families don't have $20,000-$100,000 lying around, they must secure a loan to pay the premium. After Sheely's staff evaluates a player to ensure he is draftable and places him in the program, that player is guaranteed a loan through U.S. Bank to pay his premium. Since the terms of the loan are approved by the NCAA, the player doesn't risk his eligibility. Players who secure their own loans cannot accept any perks (lower interest rates, waiving of points) that wouldn't be available to the average bank customer. Otherwise, they would run afoul of the NCAA's extra benefits rule.
In most cases, the balance of the loan is due either after the policy pays out or after the player signs his first contract. That's why Sheely warns borderline players to make sure they want to play professional football before they apply for the loan. She said one player a few years ago was a low-round draft choice and opted to go to graduate school. That left him with no income and a fat bill to cover the loan that paid his premium.
Sheely also works hard to ensure players understand the policy pays out only in the event of a catastrophic, career-ending injury. "Just having an injury that affects your draft status doesn't trigger a payment," Sheely said.
In his research, however, Bradford found policies that cover such losses. Anyone who has bought a new car should be familiar with the concept of gap insurance. In the automotive world, the buyer pays an extra fee so that, in the event of a collision that totals the car, the insurance company will pay the full amount owed on the car instead of market value, which could be significantly lower. The concept is similar in football. Such policies -- which Lerner said are available only to players projected near the top of the first round -- will cover the gap between expected guaranteed money and actual guaranteed money should, for example, an offensive tackle tear his ACL during his senior year and fall into the third round. But because such injuries are far more common than career-enders, there's a significantly higher premium (up to 80-90 percent more, Bradford said) for gap coverage.
Anyone who has bought a homeowner's insurance policy knows underwriters can be persnickety about the exact value of insured items. The same concept applies in football, so agents such as Lerner must be
What's most important to Lerner, however, is knowing most of his clients haven't seen a dime back from his policies. Since 1989, his policies have paid out only twice, to Chester and to a hockey player. Sheely said that since 1990, only about a dozen NCAA-backed policies have paid out. The rest of the players advanced to the pros, hopefully enjoying more peace of mind during their final seasons in college. "I hope the player never collects," Lerner said. "I would rather see him playing on Sunday."