The insurance business is interwoven into much of our society, from where we live and what we drive to how we pay for our health needs. It protects our families’ lifestyles upon death and allows us to handle hefty hospital bills for our newborns. Insurance transfers risk to a secondary party for a premium – a price – and it’s increasingly used by the masses to avoid potentially bankruptable situations. Though it’s rarely discussed, the insurance business is a major part of sports. People insure valuables that they couldn’t otherwise replace on their own. Along those same lines, athletes insure themselves – their bodies – in case their careers end prematurely, as some sadly do. Insurance agents and underwriters that specialize in high-risk coverage and complex policies should consider a career in the athlete insurance business.

The practice of insuring athletes became more commonplace when player salaries escalated, and guaranteed payouts for hurt stars drastically affected an organization’s ability to field a talented team. For organizations and athletes alike, this niche insurance product started making more-and-more sense. Teams don’t buy insurance on all players, instead paying premiums to cover highly compensated athletes. If an insured athlete is injured for an extended period of time – predetermined by the contract details – the policy kicks in, and the team can receive an insurance payout, often a percentage of the player’s salary. Because the team must continue paying the hurt athlete his or her salary, the insurance money can be used to fund replacement players’ salaries as well as handle ticket sales losses that result from a star’s extended absence. Some leagues steer clear of coordinating these insurance policies, but the NBA and NHL have league-wide insurance plans wherein teams pay a small portion of top player salaries for coverage. The reasoning and timing for when an athlete would insure themselves are much different. While an organization typically takes out insurance at the time a large contract is signed, an athlete does so when they’re in a risky monetary position. An up-and-coming star that’s nearing a big paid day may opt for insurance in the case of a catastrophic injury strikes before their contract is signed. The couple million an athlete will pay in premiums is more than worth it to safeguard his livelihood in the event of a career-ending injury. The athlete insurance business takes a company with smart employees and a big wallet to assess the risk and handle the payouts.

Several insurance agencies offer long-term disability and loss-of-value insurance for athletes. Team Scotti, the primary insurance brokerage firm behind A-Rod’s insurance coverage, focuses on athletes in Major League Baseball (MLB). One of the largest privately held brokerage firms in the country, the BWD Group, runs the National Basketball Association’s policy, while MetLife is the league’s insurance policy owner. Lloyd’s of London, considered the world’s leading specialty insurer, is the most unique of the bunch. Instead of an insurance company in the general sense, Lloyd’s is a market where independent members or underwriters can come to buy and sell insurance. Established in 1774, it has a history and staying power in the athlete insurance business. There are others, too many to count. Some companies dabble in it, and others – like Team Scotti – make it their primary focus. As player contracts continue to escalate, insurance companies and brokerage firms that offer financial protection will be needed to protect the millionaires and billionaires of the sports world.

Scores of athletes and organizations have cashed in on athlete insurance policies over the years. The Yankees had hopes of cashing in on A-Rod’s insurance policy earlier this year when many believed he’d never return from his latest hip surgery. With $114 million remaining on his deal, the contract is an anchor preventing Brian Cashman from rebuilding the Yanks into a more modern, cap-friendly baseball club. With a minor league stint underway, the policy requirements won’t be met, much to Cashman’s chagrin. In the NBA, Derrick Rose is the latest example of an insurance policy payout. The Chicago Bulls will recoup almost 40% of Rose’s 2012-13 salary because of the former MVP’s insurance policy. Rodriguez and Rose are exceptions to the rule, however. Most organizations hope to never cash in on a player’s insurance policy because it means a star athlete has fallen. Unfortunately, it does happen, but fortunately, insurance is in place to recover the monetary losses of athletes and organizations.