Disability Policies for Professional Athletes

Was it my imagination or did it seem as if an extraordinary number of players were injured during the Super Bowl? My wife noticed, because she asked me: if a player got hurt, would he get paid the full value of their contract or were they simply out of luck? The short answer was...maybe.

In professional sports, both parties to a contract (the athlete and the team) are at risk of loss should an athlete get injured. The professional athlete is vulnerable to an injury because it could mean losing perhaps millions of dollars worth of income over his/her lifetime. Even though many professional athletes have guaranteed contracts, what would happen after the contract expires? Would the injured athlete be able to earn a living after his professional days are over? A disruption of income of that magnitude could prove devastating to the athlete and his/her family. The risk of not protecting this amount of income without insurance to protect future earnings is simply too large.

The team (as a business) has a financial interest in the athlete's health as well. An injury to a star athlete could result in lost revenue in the form of ticket sales and advertising. The team would also be on the hook to pay a guaranteed salary to an injured athlete who can't fulfill the contract. The team would be forced to sink millions of dollars into an injured player (a non-performing asset in the eyes of the business) at a time when it would need that money to find a replacement player. A player of equivalent talent and accompilshment would likely cost as much as the injured player, further draining the team's resources. Teams would, therefore, need to mitigate the risk of the contract not being completed by insuring against possible injury, illness or death to the athlete.

There is a pretty comprehensive menu of disability and life insurance options available to athletes and organizations to protect future income. High limit disability, life, accident and medical coverages are available from a select group of insurance companies. In exchange for a hefty premium, these policies would, in the event of an injury, illness or death cover the athlete or team against loss of projected future earnings, completion of a lost contract and many other associated expenses.

Disability policies come in many different varieties and are an often overlooked part of a financial plan. In my next entry, I will highlight some of the risks associated with disability and some options to protect you and your family.

If you have any questions or comments, please post them here, e-mail me at jmahoney@apsencross.com or call my office at 508-870-0440, ext 187.