Everything You Need To Know about Athlete Loss of Value Insurance

(Because even the pros need extra coverage sometimes.)
Loss of value insurance

For a pro athlete in their prime, life is good. But what happens when an injury or illness makes the sun start setting on those glory days? Unfortunately, injuries and illnesses are often what cause an athlete’s draft position to slip significantly—which can lead to a huge pay cut. Fortunately for them, there’s something called athlete loss of value coverage to help protect against these worst-case scenarios.

What Is Athlete Loss of Value Insurance?

Basically another form of disability insurance, athlete loss of value coverage is a type of insurance policy designed to protect athletes who suffer from injuries or illnesses that cause a slip in their performance. Whether it’s a pro football player or an Olympic ice skater, injuries and illnesses can be seriously detrimental to athletes of all varieties.

Aside from being a threat to their image and performance, injuries and illnesses can cause athletes to take a serious hit on their income. Slipping to a much lower draft position, or just spending copious amounts of time on the bench, is not only stressful, but could even be a career-ender. Loss of value coverage offers a lump sum payout to injured or ill players who can’t perform (and earn) the way they once did.

How Does Athlete Loss of Value Insurance Work?

Athletes typically purchase loss of value insurance for the year preceding their draft eligibility. Coverage aims to protect the athlete’s estimated value from falling below an agreed amount (determined by the specific policy) should they suffer an injury or illness that causes their draft position to slip dramatically or otherwise severely harms their performance. Players receive a lump sum payout in the event their “draft stock” plummets.

The National Collegiate Athletic Association states that players not projected to be drafted in the top 10 are likely to have a hard time successfully filing a claim. A threshold (i.e., a specific draft position and its associated contracted value) is determined by the insurance company as the point at which they’ll offer the player a payout. In other words, if drafted below this position, the player gets their money.

Coverage limits are usually within the $1-$10 million range, and are determined by the following factors:

  • Projected draft position
  • Preexisting injuries or illnesses
  • Compensation for the first three years of the athlete’s career
  • Injury records
  • Performance records

Being drafted at a lower position means a lower-value contract for an athlete. If an injury or illness causes this slip in position, athlete loss of value insurance will cover the difference between their new contract’s value and the threshold determined by their policy. Thresholds tend to be around 50%-60% of the athlete’s projected rookie contract.

What Doesn’t Athlete Loss of Value Cover?

While loss of value coverage is a great safety net for athletes, it doesn’t cover everything. As with any other kind of disability insurance, various conditions, both preexisting and not, won’t qualify for coverage.

Here are a few loss of value coverage exemptions:

  • Preexisting injuries and illnesses
  • Alcohol and drug abuse
  • Certain degenerative diseases
  • Psychological diseases
  • Osteoarthritis
  • Injuries and illnesses resulting from violent or criminal acts
  • Injuries and illnesses that are not the direct cause of the loss of value

It’s a good idea to review your specific policy extensively so you know exactly what’s covered and what’s not. If you’re unsure whether your policy includes a certain illness or injury, reach out to your independent insurance agent to go over your policy with you.

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Who Needs Athlete Loss of Value Insurance?

Mainly athletes who stand to lose a ton of money if they’re drafted later than usual due to injury or illness. However, any pro athlete who stands to lose a boatload of income due to an injury or illness can apply.

The following athletes may need loss of value coverage:

  • National Football League players
  • National Basketball Association players
  • Major League Baseball players
  • National Hockey League players
  • Olympic athletes
  • Pro golfers
  • Pro tennis players
  • . . . and more

Injuries and illnesses can be painful and costly, whatever the sport. Losing a draft position isn’t the only way to take a huge financial hit or earn a less glamorous contract, either. Payouts from loss of value insurance can be put towards medical bills and treatment, or used as backup income during a period of recovery.

How Much Does Athlete Loss of Value Insurance Cost?

Well, it tends to be expensive. Pro athletes’ contracts tend to be in the millions, so they’re a little on the pricey side to insure. It’s common for players to pay between $50,000 and $100,000 or more annually for a policy. Factors that determine cost are pretty much the same as those that determine coverage limits offered in the player’s policy.

How Do I Get Athlete Loss of Value Insurance?

For the more obscure and less common types of insurance coverage out there, you might not be able to find what you’re looking for just anywhere. While our independent insurance agents may not be able to provide you with this kind of coverage directly, we’ll happily provide a list of agents in your neighborhood who have access to multiple insurance companies. You’ll walk away with the most options to find the absolute best coverage for your insurance needs.

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TrustedChoice.com Article | Reviewed by Paul Martin

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