NCAA sports have been increasing in popularity throughout the decades and the rules involving college sports have been changing to benefit the players. Now college athletes can make money off their name, image and likeness (NIL). This means more money in their pockets because they can make an endorsement deal, become sponsored, etc.

There’s a new product that is coming onto the scene for college althelets called critical injury insurance. According to sportico.com it “pays out to athletes who suffer certain kinds of injuries, regardless of the career implications—has become de rigueur at the start of the 2022-23 college football season.” This new policy can basically be compared to personal injury insurance. College sports are demanding on athlete’s bodies and the risk of bodily injury is extremely plausible and high for these athletes, so this critical injury insurance is protecting the players from possible bodily injuries with certain compensations related to the specific injury.

As the NCAA still bars compensation for college athletes, school purchases of insurance might be the closest to a permissible form of pay-to-play.

Critical injury insurance has basically replaced the old form of insurance called loss-of-value (LOV) insurance. The difference between CI insurance and LOV insurance is that LOV insurance only covered certain players. “The players are elite athletes who were projected to land at a certain range at the upcoming draft, who fall significantly enough on account of an injury to trigger the insurance benefit.” (sportico.com) This form of insurance was extremely popular in the 2010s but began to fizzle out at the end of the decade. One reason for the bottoming out was that determining the loss of value began to become very gray and began to create many issues between the policyholders and the underwriters, which many ended up in court.

Around the same time as LOV insurance was beginning to fade out, Pro Financial Services began creating a new form of insurance (critical injury insurance) and began selling it to pro and college athletes. “It wasn’t designed to replace loss-of-value, because we weren’t a big [LOV] provider,” said Dan Burns, Pro Financial Services’ CEO. “I think the loss-of-value experiment may have left a bad taste in people’s mouths, and that is why we came up with something that is not so ambiguous.”

“Critical injury is the lowest-hanging fruit when it comes to disability insurance, because it is so black and white,” said Eric Chenowith, the former Kansas basketball star-turned-athlete-insurance-broker. “You have the injury, you have the surgery, you get paid your benefit.”

There is a mischaracterization that CI and LOV are stand-alone policies. They are in fact rider policies meaning that they can be added to Permanent Total Disability (PTD) policies. To obtain the extra CI or LOV policies the athletes have to first qualify for PTD. College athletes, have to be viewed by an insurance company as a legitimate risk for the professional league.

JUST LIKE PERSONAL INJURY INSURANCE, THERE ARE DIFFERENT CATEGORIES FOR CI INSURANCE TOO.

The different types of personal injury damages are general, specific and punitive. General and special damages are both considered compensatory damages, meaning they aim to restore compensation to victims for their losses. These damages are sometimes referred to as “non-economic” and “economic.”The third type of damages, punitive damages, may be awarded in cases where extreme recklessness caused injury. Punitive damages are far less common in personal injury lawsuits than general or special damages.

“Typical critical injury provisions define two categories of bodily harm on which the policyholder can cash in. Category 1 injuries—which, for college athletes, typically pays out $250,000—include high-grade ligament tears, torn rotator cuffs and heart attacks. For “Cat 1” tears, reconstructive surgery within a certain period of time is required for the policyholder to receive the benefit. Category 2 injuries, which usually come with a $100,000 benefit, are mostly muscular injuries, such as torn triceps or pecs. One current underwriter has a third category, paying up to $50,000 benefits, for injuries such as herniated discs.” (sportico.com)

Critical injury insurance does not stipulate that the athlete’s career be harmed in order to receive pay out. While many of the listed injuries above are serious, athletes can recover and be ready to play for the next season. While there are variations to the cost of the coverage based on an athlete’s sport and pro potential, annual premiums for total disability policies with critical injury provisions will usually run a college athlete between $18,000 to $25,000. The bulk of that expense is from the riders, with the underlying PTD costing between $5,000 and $9,000 annually for $1 million of coverage. The top 30 prospects for next year NFL’s draft, at least 20 currently carry critical injury coverage. Want to learn more? Visit our blog page!