As we all know, if you’re prepared to pay enough, you can insure just about anything. For example, actors regularly insure parts (or all) of their bodies for eye-watering sums. Some of the most famous examples of this include Heidi Klum, who insured her legs for $2 million each, Julia Roberts insured her teeth for $30 million, and Daniel Craig who insured his entire body for $9.5 million.
While this may seem a little vein, it actually makes good business sense. Actors use their bodies to make big money, so if they became seriously injured they’d lose access to future acting opportunities. Therefore, the insurance payout would provide a cushion while they adapt to their new way of living.
Athletes are at similar, or even higher, risk than actors since most sports require a high degree of contact that can result in injury. Professional athletes in the biggest sports leagues stand to make huge sums of money in a short period of time, but a bad career move could also see their earning potential curtailed.
Therefore, specially designed insurance policies are required to cover any loss incurred by such incidents.
Personal Injury Insurance
It’s rare for athletes to go an entire career without suffering some form of injury, although most are only minor and don’t cause them to miss many games. Occasionally though, athletes suffer injuries that can prematurely end their career.
The NFL is a good example of this. American football is one of the roughest contact sports played in North America, with 580 “lower body soft-tissue injuries” in the 2019 NFL season.
With around 16.5 million fans watching each game, a lot of money is generated in sponsorship revenue, ticket sales, TV rights, and sportsbooks as fans look to bet on NFL picks and predictions. All of this means that a lot of money flows into the sport, and helps to pay the huge multi-million dollar salaries that modern athletes enjoy.
Not being able to play will, therefore, be a major financial loss, so NFL athletes commonly take out insurance against any injury they may incur.
It’s common in soccer too, both David Beckham and Cristiano Ronaldo have both had their legs insured for $70 million and $144 million respectively.
Loss of Value Insurance
It’s not just injuries that need to be insured against. Athletes regularly insure themselves against a sharp decline in their market value. This is common among younger athletes who look promising at the beginning of their career, they’ll use a loss of value policy to protect them if they can’t get a contract when they enter free agency.
Some NBA players also use insurance to protect the income they get from sponsorship and endorsement deals. While player salaries are protected under NBA contracts, income from sponsors is usually contingent on the player taking part in a minimum number of games. Therefore, being forced to sit out games due to injury or another reason would see them lose a lot of income.
Insurance for Teams
It’s not just players that take out this type of insurance. Teams often insure their players since they are obligated to pay them large salaries and often pay multi-million dollar sums to buy them from other teams.
For example, the former Texas Rangers player Prince Fielder was injured in 2016 and will never be able to compete at a professional level again. Under his player’s contract, Fielder will still be paid his full $24 million per year salary until the end of 2020.
The team doesn’t have to pay it all though, they have insurance that covers around half of it.
In motorsport, teams will also insure all of their cars against crashes. There are no professional race drivers that go through their entire careers without so much as kissing a barrier, and when they do, it costs money to repair.
Therefore, teams will take out sponsorship deals that will pay for replacement parts, similar to how a consumer car insurance policy will work. Some will even agree to sponsorship deals with companies to get a policy for free, as was the case with the BMW Williams F1 deal with The Allianz Group back in the early 2000s.
This, of course, is in addition to all of the standard insurance policies that apply to most businesses, such as public liability insurance.
When big sums of money are at stake, most professional athletes and teams will seek to insure themselves against potential losses. This is the same as just about every other industry since businesses are typically risk-averse and will seek to minimize their exposure to uncertainty when it’s possible.