College and Pro Athletes Alike Need Specialized Insurance Coverage

College athletes who expect to be in the early rounds of professional football, hockey, baseball and basketball drafts would be wise to obtain a “loss-of-value” policy to insure against the risk of a drop in draft status due to an injury, for instance.

“Loss-of-value insurance protects against the risk, in certain situations, of injuries preventing an athlete from realizing his or her expected future financial gains," explained Insurance Recovery & Advisory partner Alexander Hardiman. “For example, a college athlete who is expected to be a No. 1 draft pick for the pros but suffers an injury resulting in a much lower draft pick can insure against that diminution in economic value.”

Pro athletes can also obtain forms of loss-of-value insurance. For instance, an NFL player who is set to be a free agent following the expiration of his contract can secure a policy to insure against the risk of an injury that would result in diminished free agency value, Hardiman said.

Likewise, pro and college athletes should purchase disability insurance in case they suffer an injury that leaves them permanently unable to play.

“Disability insurance is critical for pro athletes and college athletes, especially those who are going to be drafted,” Hardiman said.

Finally, there are specialty insurance markets that may offer coverage for an athlete's loss of commercial endorsements due to a wide range of actions. While the policies vary, the trigger for coverage is generally “media coverage of conduct or alleged conduct that generates adverse publicity or public contempt,” according to Hardiman.

“If the athlete's status changes because of an event that causes adverse publicity or public reaction, the loss of an endorsement deal can have a huge impact on their income, and some high-profile athletes seek to insure against that risk.”