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Protect the Net: Evaluation of Disability Insurance for Athletes, Part 1

July 6, 2021

As professional sports continue to rise – both in prominence and revenue – so does the need to protect the future earnings of its athletes within.

Whether you, or your client, plays basketball, football, hockey or some other highly-compensated sport, there are absolute dos and don’ts when it comes to buying disability insurance.

The first step is evaluating which type of disability insurance is appropriate. There are a variety of products available including Permanent Total Disability (PTD), Loss of Value (LOV) and Temporary Total Disability (TTD).

For most team-sport athletes PTD is the most important type of disability insurance. Like any of us, athletes want to know that they can maintain the same lifestyle they’ve grown accustomed to and still put their kids through college, or whatever the case may be. That’s the whole purpose of PTD insurance.

PTD pays a lump sum benefit in the event of a career-ending injury or illness, meaning they can never play their sport again, typically paid after a 12-month waiting period.

Let’s face it: the general public only sees athletes when they compete, and not while they are out doing their everyday activities, therefore, we assume most sports-related disabilities are caused by accidents “on the field.” But, in reality, the majority of sports-related disabilities happen “off the field” and are commonly caused by things like car accidents, heart attacks, strokes, cancer, etc.

Accordingly, it makes perfect sense to protect an athlete in all areas especially given their small window of high-earning potential.

I think Jermichael Finley said it best in his The MMQB interview with Peter King, “while money has absolutely nothing to do with my decision to play, I can sleep at night knowing that regardless of what happens, my family is financially secure forever.”

Jermichael Finley bought a $10 million insurance policy before his football career was cut short by a devastating game-time collision. In that article, he went on to say that “disability insurance is never a fun conversation, and writing those annual checks to protect myself is tough. But now, more than ever, I understand the importance of protecting yourself, protecting your family, and protecting your future earnings.”

Whether you are an athlete, agent, attorney, business manager or trusted advisor here are a few things you should know:

  1. Determine the proper benefit amount. What type of lifestyle does the athlete want once they retire and how much will it take to sustain that lifestyle for the rest of their life?  Their current salary puts a cap on the benefit amount, however, the benefit can increase due to bonuses, endorsements and income from other sources.
  2. What is the budget? PTD should be budgeted and incorporated in an athlete’s comprehensive financial strategy which includes investments, retirement accounts and other assets. PTD is considered a “contingent” asset meaning that its payment is contingent upon a career-ending injury. If that happens, the PTD policy may become one of the athlete’s most valuable assets, and therefore, deserves the same consideration and annual evaluation.
  3. Finally, consider the source from where you buy your insurance. Are they a direct provider or a specialty insurance consultant? Do they have experience with high-net worth individuals and especially the unique needs of a professional athlete? Specialty insurance consultants or brokers work for the insured, not the insurance company – which is better for you if a claim happens. The right insurance advisor will advocate on your behalf to get that claim paid. Plus, they are not limited to just one provider – they can access the insurance market through multiple syndicates.

Like anything else, a well-planned insurance strategy can certainly help make the best of a terrible situation and protect that which is most important to you, but it starts with PTD insurance.

To receive the next update on specialty insurance programs tailored for athletes including Loss-of-Value Disability or Scholarship Protection, please contact me here to further discuss.

Ron Boynar
Sales Executive, Benefits

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This post was originally published in January 2017; updated July 2021.

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