Insurance: boring but necessary

As draft prospects prepare for the NFL Combine, attend all-star games and focus on their workouts, one item that sometimes slips through the cracks is insurance coverage. After seeing two players sustain serious injuries Monday at the Senior Bowl practices, it reminded me of the importance of insurance.

Usually, obtaining insurance is the job of the financial adviser, but many players have yet to choose one. Regardless of whom my clients select, I constantly try to educate them on the financial and investment components of their careers -- basic things like accurately balancing a checkbook, keeping receipts, staying organized and the importance of insurance.

Many draftees drop off their parents’ or schools’ plans once they graduate. As a result, there are many who are working out without any type of basic health coverage. So I make sure my new clients are covered. Additionally, I get them an “umbrella” policy, which usually adds $1 million of insurance on top of their new or existing health, auto and even renter’s policies. So if they get into a car accident and there are liabilities above the usual limits, the umbrella policy kicks in to cover addition expenses such as attorneys’ fees and even lawsuit settlements (everyone should have this insurance).

The trick is to get the umbrella policy before a player is drafted. Many insurance companies no longer cover professional athletes since O.J. Simpson used his umbrella policy to help pay his legal bills. A draftee can usually lock in on this coverage and keep it going once he’s initially approved. An umbrella policy is a great deal because it usually cost less than $700 per year.

Pro athletes can become victims of frivolous lawsuits, so I recommend that my clients be over-insured.

As for career-ending disability insurance, I recommend it on a case-by-case basis for my clients. For one, it’s very expensive. A $1-million policy can cost about $20,000 to $25,000 for a 22-year-old player. And the player will only collect if it’s a true career-ending injury. So if a player tears his ACL while working out at the NFL Combine and doesn’t get drafted, but he gets back to nearly full strength, the policy won’t cover him because it’s not a “career-ending” injury. In addition, insurance companies try to exclude many previous injuries and won’t even cover later-round draft picks.

There’s nothing sexy about insurance, so nobody likes talking about it to the players. However, when something goes wrong, the first question usually is, “Did you have insurance?”

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