Insurance Considerations for Athletes and Entertainment Professionals
As a professional athlete, you have a lot riding on your health and wellness. Because the career span of a professional athlete is significantly shorter than most professions (on average 3.3 years in the NFL, 4.6 years in the NBA and 5.6 years in the MLB1), an injury can completely derail your ability to save enough to last for your entire life. Even if you have a lucrative contract, either your current contract, your opportunity for future contracts, or both may be directly tied to your health and wellness. Given the above, a typical disability insurance policy will likely not provide the level of coverage you need. So, what policies should you have? We recommend four types of insurance to protect your family and your future.
- Life insurance – This is a non-negotiable because it provides financial protection for your loved ones should you die unexpectedly. No one likes to think about what will happen after they die, but it’s critical that you have the appropriate policy in place to support your family. Learn tips for choosing a life insurance policy.
- Permanent total disability – PTD insurance provides coverage in the case of a permanent injury or illness that prevents you from continuing in the sport. PTD policies typically pay a lump sum amount after 12 consecutive months of disability.
- Temporary total disability – TTD insurance provides coverage if you are unable to compete for a short time due to injury or illness. This can be especially important for players who get paid for entering and winning competitions, such as golfers and tennis players, because missing a few months during the peak playing season can result in a huge financial loss.
Loss of value – Athletes who have the potential for high salaries in the near future may want to consider a loss of value policy. These policies pay out if an unexpected event, such as an injury or illness, causes you to miss out on an opportunity. Two situations where loss of value insurance may be particularly important include:
- To insure highly rated draft picks should they slip down the draft board due to illness or injury
- To insure top players entering into free agency
In addition to the insurance above, you may want to consider additional policies based on your specific situation and needs. Options include:
- Contract completion – If a key athlete is unable to play, the team may lose out on revenue from ticket sales, while still needing to pay the athlete’s salary. This can result in millions of dollars of financial loss for the team at a time when it must find a new player to take the injured player’s spot. A contract completion policy insures the key athlete’s compensation so the team does not have to take on this financial burden.
- Loss of endorsements – Top athletes often make significant money through endorsement deals. However, many of those deals have claw-back agreements if an athlete isn’t able to participate in enough games. A loss of endorsement policy can help protect from endorsement money claw-backs.
- Cost of agents/managers – Athletes often want to work with their agent or manager during periods of disability, as these professionals continuously enhance the athlete’s value and endorsement power. The cost of paying agents and managers can be significant, but there are policy options that cover this expense.
- College draft protection – A college athlete who decides to stay in school rather than going pro risks sustaining a career-ending injury while playing in college. A college draft protection plan insures the future value of a professional career.
Creative Planning Sports & Entertainment is a specialty practice of Creative Planning. Each of our dedicated teams specializes in working with sports and entertainment professionals and includes an attorney, a CPA and a CERTIFIED FINANCIAL PLANNER™ practitioner. These teams are also supported by Creative Planning’s dedicated insurance professionals. We serve as your partner in navigating the unique challenges of your profession while helping you remain on track toward achieving your long-term financial goals, both on and off the field/court. For more information about how we can help you plan for your financial future, please schedule a call.