Insuring an Arm

I did it for a couple of clients in their arbitration eligible years and the last year of their current contracts. Was not very complicated to get a quote but then required some thorough medical evaluation to get the policy approved. Did them for both pitchers and a catcher at the MLB level. Have not done a college player or a HS player. 

P.S. I am NOT an agent...no way, no how, no thanks! 

Any insurance is losing you money in expected value because the insurance is making a profit on this. What an insurance does is distributing risk on many shoulders and it slightly lowers the expected value (if 1000 persons get the insurance for 10 years the average person will lose money)  while avoiding the variance that can hit you, you are essentially avoiding the big loss.

That still can be a good idea to lose a bit of money to avoid the potential catastrophe (like your house burning or you getting a disease that costs 200k) but if you think you can make money with an insurance think again, insurances don't give away money.

An insurance is good against a risk you can't cover but it is not a good way to make profit of this.

Basically it only makes sense if the potential loss is big enough, i.e. a big gap between worst and best outcome. The above mentioned pro example makes sense, maybe even a player getting a full ride at an expensive school. But if your best outcome is a 25% scholarship or even a walk on you might pay more into the insurance than you are getting out of it.

 But sure for a soon free agent for whom an injury cost 70 mil compared to being healthy such an insurance might make sense because the potential loss is so bad.

@Dominik85 posted:

Any insurance is losing you money in expected value because the insurance is making a profit on this. What an insurance does is distributing risk on many shoulders and it slightly lowers the expected value (if 1000 persons get the insurance for 10 years the average person will lose money)  while avoiding the variance that can hit you, you are essentially avoiding the big loss.

That still can be a good idea to lose a bit of money to avoid the potential catastrophe (like your house burning or you getting a disease that costs 200k) but if you think you can make money with an insurance think again, insurances don't give away money.

An insurance is good against a risk you can't cover but it is not a good way to make profit of this.

Basically it only makes sense if the potential loss is big enough, i.e. a big gap between worst and best outcome. The above mentioned pro example makes sense, maybe even a player getting a full ride at an expensive school. But if your best outcome is a 25% scholarship or even a walk on you might pay more into the insurance than you are getting out of it.

 

 

I’m not sure I follow. Why would someone think they can make money buying insurance? 

Yeah, it’s not money making. It’s protecting an asset. If a kid goes to college instead of drafting and then blows his arm out in college. Or a team signs a guy for huge money and has concerns about his arm. I know people must do it, just not sure how common it is.

@used2lurk posted:

I did it for a couple of clients in their arbitration eligible years and the last year of their current contracts. Was not very complicated to get a quote but then required some thorough medical evaluation to get the policy approved. Did them for both pitchers and a catcher at the MLB level. Have not done a college player or a HS player. 

P.S. I am NOT an agent...no way, no how, no thanks! 

My uncle represented a pro athlete in the early 80’s. He was doing other legal work for this athlete. The athlete trusted him and made the request. He saw a future in representation being big money. He acquired a second athlete. With two clients he decided the organization-athlete negotiating relationship was so sleazy it didn’t matter how much money there was to be made. These athletes were past their prime but still well paid. When they retired my uncle was done.

An insurance is good against a risk you can't cover but it is not a good way to make profit of this.

Profiting off insurance is called fraud.

I remembered reading something so I looked it up, Clemson bought a 5 million dollar insurance policy for Deshaun Watson, and Trevor Lawrence, expected to be #1 in next years NFL draft took one out on himself (5 mil as well)  that covers total permanent disability and unable to ever play in the NFL.

@TPM posted:

I remembered reading something so I looked it up, Clemson bought a 5 million dollar insurance policy for Deshaun Watson, and Trevor Lawrence, expected to be #1 in next years NFL draft took one out on himself (5 mil as well)  that covers total permanent disability and unable to ever play in the NFL.

 

This is done off an established market. I wonder if an insurance company would bother with a family walking in the door stating, “We think our kid is a future pro athlete. We want to insure him” and no one has ever heard of the kid and his place in the market isn’t established.

I’m guessing the price would be prohibitive. Watson and Lawrence knew/know whatever the policy costs they’re worth a lot more if they don’t get injured.

There are many more past established first round picks in the NFL draft who took out insurance before their last college season.

I would think for a pitcher he would have to be established as a potential first or second round round pick to make it feasible.

@RJM posted:

An insurance is good against a risk you can't cover but it is not a good way to make profit of this.

Profiting off insurance is called fraud.

Didn't imply straight fraud, more the idea you pay a little into it and then you get a million.

If we are talking an amateur athlete we either talk a smaller insurance amount or a prohibitive fee for the insurance. Can't see this being a good deal unless you have maybe a surefire first round talent that goes to college.

http://www.ncaa.org/about/reso...nsurance-white-paper

There might be newer info but I found this.

From what I’ve read, only one company does it. Talking about a private policy, not one by school or ncaa.  I know it’s not unheard of.  Like I said, the kid we knew had a million on his arm after senior year in hs.  He played in college, no injuries, signed for over a million and had a good mlb career.

@baseballhs posted:

From what I’ve read, only one company does it. Talking about a private policy, not one by school or ncaa.  I know it’s not unheard of.  Like I said, the kid we knew had a million on his arm after senior year in hs.  He played in college, no injuries, signed for over a million and had a good mlb career.

How was the million dollar valuation set by the insurance company?  Was he drafted and opted to go to school?

I think he was.

We considered such an insurance policy for my son when he was a soph in D1.  We wanted something to have in case he suffered a career ending injury while in college that prevented him from being drafted.  There were 2 insurance companies that were involved I think.  Both did their due diligence and research in determining what type of player he was back then, stats, projections, etc.  They had a list of restrictions, definitions of what career ending injury entails and so forth.   End of day we had 2 quotes, one for $1mil and other for $2.5mil.  The yearly premium was expensive though, I think $12K for the $2.5mil.  It was son's choice not to accept it and take his chances.  My reasoning was we would foot the bill and when/if he got drafted he would reimburse us.  He was projected at that time to go in the 1st round, thus would have no problem financially.  Luckily we never got the policy and he was drafted high.  Looking back, I still would have leaned towards getting it just as a backup plan just in case of an injury.

Do you remember the companies? You can DM me if that’s better.