Athletes try to avoid fumbling earnings with injury insurance
by Danny Ecker
April 23, 2016
Like most football fans, Dan Burns spends Sundays in the fall on the edge of his seat watching nerve-racking finishes to each week's NFL games. But he has a different reason to bite his nails.
“We hold our breath when we see the golf cart come out on a football field,” he says. “We know that's where the exposure is.”
Burns is president of Pro Financial Services, one of just a handful of companies nationwide that sell high-value insurance policies protecting athletes from the loss of future wages if they get hurt.
Nearly every player projected to be drafted in the first three rounds of the NFL draft, taking place at the Auditorium Theatre April 28-30, has purchased customized insurance protection, including many “loss of value” policies from which they will collect if drafted far lower than expected due to injury or illness. Several of those policies are underwritten by 36-year-old PFS, headquartered in the West Loop.
Paying to hedge against major injuries or events that drastically lower income potential has become more popular among pro athletes in recent years. The main reason: Player contract values have skyrocketed across all sports with a boom in the fees that teams get from broadcasting rights.
That has meant a surge of high-risk, high-reward business for PFS, whose policies cover both the athletes seeking to guarantee portions of upcoming contracts and the teams that are committing small fortunes to them.
Teams “are insuring individuals for the equivalent of commercial airplanes or office buildings now,” says Burns, who estimates the company's premiums have increased by 50 percent over the past five years. “You're pretty much in a day and age where every team has one if not two superstars that make eight figures a year—and close to nine figures for a full contract.”
Missing half of a football season could easily equate to a $5 million insurance payout for a player. It's not uncommon for NFL players to be insured for between $300,000 and $500,000 per game. Many baseball players are insured at $100,000 per regular-season day.
Top college football players entering their draft-eligible years and established pros on the verge of signing big free agent contracts often pay between $5,000 and $15,000 per $1 million of coverage for a single year, looking to guarantee that anything from a torn ACL to a dislocated elbow won't completely ruin their next big payday.
Those premiums are separate from standard disability insurance, which all players have and which only helps recover portions of current contracts after injuries. Loss of value coverage, offered by PFS and such competitors as Lloyd's of London and Houston Casualty, is designed to protect upcoming financial windfalls.
But while PFS enjoys the spoils of booming contract values and more players buying policies, the headwinds are getting stronger as the spotlight gets brighter on the long-term effects of concussions—just last week a federal appeals court approved a $1 billion settlement that would pay out to former and current players specifically around concussion injury concerns.