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Easing the Pain with Insurance

The basketball world gasped as Jayson Tatum’s torn achilles brought him and the Celtics’ playoff hopes crumbling to the ground. If his contract were insured, it would prevent a tremendous team loss from being a tremendous financial loss.
As the news confirmed Jayson Tatum’s unfortunate injury, some thoughts went back to happier times last July when he finalized a five-year, $314 million guaranteed contract extension with the Celtics. The Celtics have not publicly stated whether they’d insured any of Tatum’s contract, but most sources assumed they did. But this is not the first time an Achilles injury has shined a light on insurance. When Aaron Rodgers went down in his first game for the Jets, it later came out that the team did not insure his contract. Sportico reported that the Packers had taken out a policy, but the Jets failed to renew it when they acquired his contract.
Types of Insurance
For professional teams, there are two types of insurance that reimburse contract costs for injured players: Permanent Total Disablement (PTD) for career-ending injuries and Temporary Total Disablement (TTD) for major injuries that require long recovery times. Some form of these policies is required by the NBA and NHL for each team’s highest-priced players. The MLB and NFL lack a similar requirement, leaving it to the discretion of the teams. These are high-premium policies that well exceed $1 million a year, depending on the sport, the contract value, and the age and condition of the athlete. As a result, most teams that use PTD or TTD policies generally do it for some percentage of the guaranteed salary and not the full amount.
For the injured players, any salary guarantees are spelled out in their contracts. The NBA, MLB, and NHL require guaranteed contracts. The NFL, MLS, and WNBA do not. For their medical expenses, most players in the major professional team sports are covered by insurance policies that are built into the leagues’ collective bargaining agreements. In most cases, the players are covered by a league-wide policy, so they can keep their coverage if they switch teams. Technically, professional team athletes are also covered by their state’s workers' compensation program while they are playing. When it comes to individual sports, such as tennis or golf, players are considered independent contractors and not employees of any team, the PGA, the WTA, or the ATP. They must secure and pay for their own insurance. Some players’ associations offer group coverage that individuals can buy into.
On the college level, starting in 2024, the NCAA required schools to give their athletes medical coverage that will extend two years after the athlete completes their eligibility. The coverage applies to injuries sustained while participating in an NCAA sport or practice. These policies have a $90,000 limit per injury and no deductible.
The Providers
Contract insurance, as well as event and venue insurance, is a specialty and not something a team can get through their local State Farm agent. There are brokerages with dedicated sports practices that focus on this niche, working with various underwriters to construct custom policies. Some of the major brokers in this area include Marsh, K&K Insurance, NFP, HUB International, Insurance Office of America, and American Specialty Insurance.
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