Does lack of real insurance drive players to NFL?

With a record number 56 juniors declaring for the NFL draft this week people begin the debate of who made a good decision and who made a mistake in giving up their collegiate eligibility. Further confusing the situation is the uncertain labor future given the expiring CBA making some form of work stoppage a distinct possibility.

What isn’t discussed is the lack of true insurance for many student-athletes to protect their financial futures should they return for another year of college football. While the NCAA created the Exceptional Student Disability Insurance (ESDI) Program in 1990 to allow student-athletes with pro potential in football, baseball, ice hockey, and men’s and women’s basketball, an opportunity to obtain insurance the program is far less valuable than meets the eye.

In football a student-athlete must be predicted to be a first or second round draft pick and the maximum coverage allowed under this policy is $ 5 million. Furthermore this policy, and only under certain conditions, allows the student-athletes to obtain a loan against their future earnings to cover the premium (about $ 8,000 per million of coverage).

While the aforementioned requirements may be reasonable, what is of major concern is that the policy only covers “permanent total disability.” Thus under this policy a star player who is seriously injured during a game and sees their draft prospects plummet from a top 5 pick to free agent stats because they aren’t “permanently disabled” collects nothing.

True “loss of value” coverage is offered by insurance carriers whereby a player projected to be a top ten pick that suffers an injury but manages to continue playing at a slightly lower level and gets drafted in the fourth round collects on the gap in compensation between their anticipated early first round and their actual fourth round salaries. As one would expect the premiums for such coverage are tremendously high. After much debate in the fall of 2010 the NCAA finally relented and allows student-athletes the ability to obtain such coverage, where they miss the boat is that they prohibit student-athletes and their families the ability to get loans based on future earnings to pay for these premiums.

As a result, the ability for an elite college football player to insure against an injury that doesn’t qualify as total disability but does hamper their pro potential are priced outside of their means. Something the NCAA could and should permit. Thus, it is not surprising to continue to see the flow of college players making the jump to the NFL earlier than they may otherwise.

For an outstanding piece on this subject please read “The Legal & Business Aspects of Disability Insurance in Professional and College Sports” written by Glenn Wong and Chris Deubert.

The NCAA Exceptional Disability Insurance policy can be found at this link.