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Loss-of-Value Insurance FAQs

What is loss-of-value coverage?

Loss of value (LOV) coverage is insurance that protects a student-athlete’s future contract value from decreasing below a predetermined amount due to a significant injury or illness suffered during the policy’s designated coverage period. It is typically purchased for the year leading up to the athlete’s draft eligibility. It requires medical underwriting and may include exclusions for specific pre-existing injuries or illnesses.

How does loss-of-value coverage work?

Insurance underwriters will first determine an athlete’s eligibility based on their projected draft position. If they are projected to be selected early in the draft, underwriters could offer a coverage limit that typically falls between $1 million and $10 million, based on the projected draft position. The insurance underwriters will then set a loss-of-value threshold which is the specific draft selection, and therefore a specific contract value, in which the athlete must fall below in the draft and sign for in order to trigger LOV policy benefits. There is no set standard for LOV policy thresholds as insurers establish this amount based on their unique underwriting evaluation and overall company risk tolerance. LOV policy thresholds can range from an amount below the contract value of the last pick in the draft, to upwards of 60% of the athlete’s projected rookie contract. In rare cases, the threshold could exceed 60%. If the professional contract an athlete signs falls below that threshold as a direct result of an injury or illness suffered during the coverage period, and successfully satisfies all the policy requirements, the insurance would pay the difference between the actual contract’s value and the policy’s predetermined threshold value.

Why doesn’t the NCAA offer loss-of-value coverage?

The NCAA provides permanent total disability (PTD) coverage through the NCAA Exceptional Student-Athlete Disability Insurance (ESDI) Program which protects athletes who suffer an injury or illness that prevents them from ever competing as a professional athlete. The NCAA does not offer LOV insurance at this time because the coverage has not been shown to consistently benefit student-athletes who file a claim. Because of the complexity of LOV policy wording and the subjective nature of underwriting and accurately projecting draft positions, LOV claims are often times litigated and the market is consistently changing.

Who should purchase loss-of-value coverage?

If an athlete chooses to purchase LOV coverage, the NCAA recommends they only do so if they are projected to be selected among the top 10 picks in their respective draft. Athletes projected to be selected outside of that range may have challenges proving the cause of their loss in earnings if they file a claim.

How can coverage be paid for?

Subject to conference policies and procedures, schools may permit student-athletes to use the NCAA Student Assistance Fund to purchase either PTD or LOV policies. Student-athletes may also take out loans against their future earnings to pay these premiums. Please note that premiums paid using Student Assistance Funds may be considered a taxable benefit to student-athletes and may affect their eligibility for financial aid. In addition, it is recommended that a tax professional is consulted to determine any tax implications for a student-athlete on claim payment of PTD or LOV policy benefits if the coverage premium was paid using Student Assistance Funds.

What factors can affect a payout?

It’s important to understand that simply suffering an injury or illness and then being selected with a later draft pick than anticipated does not guarantee a claim will be paid. Proving an injury or illness was the sole and direct reason for the decrease in value can be difficult, and many factors can be used to void a claim. In fact, policies include standard exclusions for pre-existing injuries or illnesses, osteoarthritis or degenerative conditions, drug and alcohol use, criminal acts and mental, nervous or psychological disorders. But other factors that can adversely affect a claim include: off-field issues; poor performance during the season; poor performance at pre-draft events; a rise in the draft value of other athletes due to superior performances; changes in professional teams’ needs. 

What should I consider if I purchase loss-of-value coverage?

There are several effective practices you can follow when considering LOV coverage. First, be sure you know what coverage you are buying and get multiple quotes from multiple brokers/insurance agents and insurers. Make sure you understand the terms and conditions of the policy before making a purchase, and don’t be afraid to ask a lot of questions. Ask if some of the exclusions can be removed, or if the definitions can be reworded. Watch for exclusions that pertain to previous medical treatments or recommendations, or those that omit coverage for cumulative injuries, osteoarthritis or other degenerative processes of the bones, tendons or ligaments. Also, be as thorough as possible on the application – it’s best to err on the side of being over-inclusive when disclosing a medical history. Third-party consultative services from an independent and unbiased perspective may be necessary to navigate the complexity of loss-of-value proposals, forms, and application processes.