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Sport Sections
Friday, March 9
Sports Insurance 101: A primer

Albert Belle's career is almost certainly finished, but thanks to insurance the Orioles invested in, the franchise isn't. Belle signed a five-year, $65 million contract in 1998 and the three years left -- 2001 through 2003 -- are worth $13 million a year. The Orioles are covered for 70 percent of the $39 million total, minus the amount that they paid for the policy.

So how does team sports insurance work?

Before or shortly after a team signs a player, the financial officer and the owner get together and decide on a particular insurance policy. Each team evaluates its own threshold of risk. Some teams have a standard amount they will spend for a policy, while other teams will decide not to insure any players. According to one insurance executive, players that "make more than $3 million per year are considered insurable."

The amount (or the premium) that the team pays to the insurance carrier is determined by several factors. The first factor is a waiting period. The waiting period is the amount of days before a team can collect on a player's injury. The longer the waiting period, the less the team will have to pay for the policy.

In baseball, there are usually 90- and 182-day waiting periods, with the period beginning at the start of the regular season. If a player who is covered by a team's insurance policy injures himself on March 7, 2001 and the team has agreed to a 90-day waiting period, the team will collect its money on the 91st day of the regular season, or June 30, 2001. A team with a 182-day waiting period (the standard length of the season) will automatically start collecting on a long-term injury beginning on opening day of the following season.

In other words, if a player injures himself on August 15, 2001 and the team has a 182-day waiting period, the team will begin to collect on opening day 2002, if the athlete is still injured and unable to play.

Here's an example of how a team collects on an insurance policy. A player is injured on August 15. He is injured through the first 30 days of the following season. We'll assume the team is covered for 70 percent of the player's $10 million contract. The team collects nothing for the previous season but immediately starts collecting at the start of the next season. How much will it collect?

1. $10 million (season salary) divided by 182 (days in season) = $54,945 per day
2. Multiply $54,945 times 30 days missed due to injury = $1.645 million loss to team
3. 70 percent (amount insurance company covers) of $1.645 million = $1.154 million
4. $1.154 minus amount of premium = total amount insurance company pays team

The cost of the premium is affected by other primary factors. What percentage of the contract is covered? The standard amount is the 70 percent used in the above example, but teams will insure as little as 50 percent and as much as 80 percent. The lower the coverage, obviously the lower the premium.

Another factor affecting the premium is the age of the player. The older the player, the higher the premium -- as an older player is more likely to suffer a career-ending injury. Maximum policy is five years. Position is also a factor. Higher-risk positions like pitchers and catchers generally cost more to insure. Type of sport also is important. Players in the NFL and NBA typically cost more to insure because of the sport's danger.

The NBA and the NHL have league programs that require their teams to insure a certain number of players on their roster. The NBA has had a mandatory rule since the early '90s that requires a team's top six salaried players to be insured.

While team insurance is typically for temporary injuries, players can also take out their own personal insurance for career-ending injuries. The amount a player has to pay and the amount he can collect is based on his future earning value.

Darren Rovell covers sports business for He can be reached at

Belle's playing days over; release or DL only options