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Loss of Value Insurance for NFL Prospects

A new type of insurance made the mainstream sports news earlier this year—loss of value insurance carried by perspective NFL drafts. Ifo Ekpre-Olomu, Marqise Lee and Morgan Breslin all made a splash after slipped pick positions, possibly caused by college injuries, triggered their Loss of Value insurance coverage to kick in.

Compensation for Salary Loss

Unlike disability insurance, which only pays if the player sustains an injury that permanently ends his football career, loss of value insurance provides top NFL hopefuls with high-end policies that could pay millions of dollars in one-time coverage. The coverage is intended to partially compensate for the salary loss the player experiences between what the original draft projection would have brought in and the salary the actually pick offers.

Ekpre-Olomu, out of University of Oregon, was projected to be a first round 2015 draft pick before tearing his ACL a few months before the draft. He was ultimately drafted in the seventh round. USC’s Marqise Lee injured his knee and, come 2014 draft time, he slipped from a projected first round pick to a second round grab. Morgan Breslin, also from USC, experienced the biggest draft upset, going from an anticipated first-day pick to not being drafted, possibly because of sports hernia surgery and missed-games due to injury. All three men had loss of value insurance, triggered by anything from slipping below a first round draft pick (Ekpre-Olomu) to receiving a contract valued below a certain threshold (Lee). Ekpre-Olomu, Lee and Breslin have all filed loss of value claims because of the draft upsets, though no such claim has successfully paid out to-date.

Lee’s and Breslin’s claims have both been denied (with the insurers claiming that previous injury information was not revealed properly) and the men have moved onto court battles. If the claims are approved, Lee stands to get up to $5 million while Breslin is expected to collect $750,000 to $1 million. Ekpre-Olomu’s $3 million claim is widely expected to be the first successful execution of a loss of value claim because his stellar season last year followed by a post-season injury can be tied so clearly to an effect on the draft outcome.

Buying Loss of Value Insurance

While the benefit of this type of insurance is clear, the cost of buying loss of value insurance can be far too much for the unpaid athletes and their families. Smaller policies, such as Breslin’s which reported has a payout cap of $1 million, still carry premiums of $30,000 or more. Larger policies, the ones covering most top-tier student athletes with this type of insurance, regularly run north of $50,000 or $60,000 (Lee’s premium was nearly $95,000).

Luckily for the players, the cost of this subset of disability insurance has recently become more manageable after Texas A&M discovered that schools are able to cover a portion of the insurance for their athletes using the school’s Student Assistance Fund. Since this revelation, at least six major universities have provided select players with coverage on the school’s dime.

Protecting a Players Value

In addition to simply insuring a student athlete’s future, this incentive can also help convince some players to return to school for another year rather than declaring for the draft early. With the potential for injury threatening an athlete’s future NFL prospects and earning power, many students strongly consider entering into the pro-draft before finishing college. Loss of value coverage protects their current valuation, allowing them to confidently return to the collegiate field for another season.

More and more players have been electing for this type of additional insurance, particularly since schools can pay the steep premium for its top players; but with the rocky state of claims right now, it’s not guaranteed that having coverage will protect these prospects.

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