An Advisors' Guide to Excess & Surplus Disability Insurance

Update on The Current State of Sports Insurance

Posted Tue, Apr, 13th, 2021
By Exceptional Risk Advisors

With the start of baseball season and the sports industry making strides to return to normalcy, it seems like a good time to provide an update on the current state of sports disability insurance.  It goes without saying that this past year created many challenges for the athlete and the advisors trying to insure them.  In this blog post, we'll discuss a pre-pandemic insurance buying schedule for athletes, how the pandemic has affected contract values and buying schedules, and ways to pivot in this new landscape. 

In a typical sports insurance buying year, the schedule is as follows: January to February for baseball; July to August for football; and September to October for basketball and hockey.  If there is a breakout star athlete whose value drastically increases based on their performance mid-season, one can procure insurance at anytime. 

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The pandemic wreaked havoc on everyone's schedule and resulted in a prime additional buying season, called the "bubble season".  Advisors and athletes had a heightened sense of awareness as seasons were postponed and canceled.  At Exceptional Risk Advisors, we saw the opportunity to pivot and design policies around the "bubble".  Tailored solutions were generated for each individual athlete based on their needs. 

For example, we placed coverage for a standout wide receiver who was expected to enter the final year of his rookie contract.  With the unknowns of the current environment, potential lack of paychecks and not knowing when the season could or will start, the player’s agent and insurance advisor sought out alternative insurance solutions.  Exceptional Risk Advisors developed a $15M Permanent Total Disability policy that required a minimum down payment of 25% at the time of binding with the balance due at a later time.  This payment schedule allowed flexibility for the player to continue to provide for his family and protect his next lucrative contract.  As the season started, we worked with the player on his installment date to determine the next course of action.  During the uncertain time, he was fully covered and protected.  

We saw the impact on contract values vary across the four major sports.  As we had all learned to pivot, so had the sports franchises, resulting in cleverness in contracts that satisfied all parties involved.  To illustrate, for the MLB, instead of a typical 4 year contract, we saw contracts expand to a 5th year which made up the difference from year one.  It should be noted, the need for insurance remained unchanged.  If a baseball player became injured in the final year of their current contract, their future multi-million-dollar contract would be at risk.  While working towards free agency, baseball players should protect themselves during the team-controlled years.   Such coverage includes permanent total disability protection that pays in the event of a career ending injury or illness.

For marquee college athletes in Division I schools, the need for disability insurance was and is still prevalent.  With the madness of basketball over and national champions crowned, advisors should be priming their football star athlete clients.  In some good news, football schools are actively shopping and binding coverage now for next season with the expectations of many more fans in the seats. 

If you'd like to hear more about the current state of sports insurance and learn how to unlock opportunities in this industry, we will be hosting a webinar on the topic later in the month. 

Please register for the webinar here