How the NFL insures its players' multimillion-dollar salaries
11/08/2024 04:06
Sports insider Andrew Brandt broke down the two kinds of policies NFL teams use to insure their star players and whether the high premiums are worth it.
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Insurance isn't just a big part of Americans' lives. It's also an incredibly important part of the NFL.
When Jets quarterback Aaron Rodgers tore his Achilles tendon in the first week of the 2023 football season, he was unable to play for the New York Jets for the rest of the season. In instances like this, insurance can help teams recoup some of their losses.
But it isn’t always worth the investment, as the insurance premiums are expensive and can easily cost tens of thousands of dollars, and even up to hundreds of thousands of dollars, for a single player.
"It’s a cost-risk assessment," Andrew Brandt, former vice president of the Green Bay Packers and sports insider, told Joe Pompliano on Yahoo Finance’s Sports Report podcast (see video above; listen below). "That’s what every team goes through."
Brandt pulled back the curtain on how teams take out insurance policies for the big names in the game.
"Teams will do big contracts with players," Brandt explained. "They will then enter in insurance agreements for the player being the beneficiary. But the player signs off that the return would go back to the team and that the team would get [salary] cap credit for any return premiums."
In the case of Aaron Rodgers's season-ending injury, the Jets did not take out an insurance policy on his renegotiated contract, meaning the Jets were unable to claw back a portion of the $37 million guaranteed to him that year. The Jets also lost out on insurance money they could have used for their salary cap the next year.
According to CBS Sports, out of the 13 quarterbacks in the league with contracts averaging $45 million per year or more, only one doesn't have an insurance addendum in his contract — Lions quarterback Jared Goff, who signed a $212 million contract extension this year.
Most of the time, insurance contracts only cover PTD, or permanent total disability, which applies when a player sustains a career-ending injury, something that seldom happens.
"Those premiums, while very reasonable, rarely, if ever, pay off," Brandt explained.
Alternatively, a player can be insured for TTP, or temporary total disability, if they are sidelined for only a couple of games.
"That’s extremely expensive because football has a 100% injury rate," Brandt said. "How are you going to insure for temporary games missed when every player misses games — plus deductibles, plus exclusions?"
Injury is part of the game of football, though the NFL has made moves in recent years to try and reduce the number of injuries. In May 2024, the NFL approved a new kickoff play that aimed to reduce the number of high-impact collisions (and injuries) in a game.
"It's about preserving the game that Americans have come to love while being responsible for protecting players from unnecessary risk," NFL executive vice president of Football Operations Troy Vincent told Yahoo Finance’s Josh Lipton earlier this year.
When considering other factors, like previous injuries that could increase the likelihood of reinjury, Brandt said PTD insurance was usually the only cost-effective policy to take out.
"TTD, frankly, I found not to be cost-effective," he said. "[I] did it on one or two contracts, some of the big quarterback or defensive end contracts, but very rarely."
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