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ANTONYA ENGLISHMore college athletes are buying disability insurance in case their careers are ended by an injury.
The phone calls to Keith Lerner's office used to come primarily from a handful of elite college athletes, strongly urged by school officials to think about the unthinkable: career-ending injuries leading to the loss of millions of dollars.
Most inquired during the summer. Many made the cursory call, asked a few questions, then moved on to preparing for the next football or basketball season.
Then came Jan.3.
It took one horrific, nationally televised injury to Miami tailback Willis McGahee to make athletic disability insurance more prominent than before.
When McGahee went down with what looked like a career-ending injury in the national championship game, it had a ripple effect, causing everyone from big-time football players to high school pitching phenoms to ask: "How much do I stand to lose if I never can play again?" and "What can I do to protect myself?"
"After that story came out, it was probably talked about in every football practice, every meeting, every football gathering after that," said Jim Padilla, an agent with the Horton Group in Chicago who has been a broker for college athletic disability insurance for seven years. "If a high-profile player goes down, everybody starts making calls trying to find out about getting insurance."
"The interest in athletic disability insurance has risen dramatically after what happened to Willis McGahee," said Juanita Sheely, travel and insurance coordinator for the NCAA.
Watching McGahee being helped off the field with torn anterior cruciate and medial collateral ligaments in his left knee sent a wake-up call to athletes around the nation - and more important, their parents - that it's better to be safe than sorry.
McGahee, 21, discovered it just in time. Hours before the championship game, he and his family took out a $2.5-million policy, the largest issued to a college sophomore.
McGahee put his future in the hands of Lerner, a Gainesville chartered life underwriter and financial consultant. Since 1988 he has written policies for some of the top college athletes in the country, including six of the top 34 players in the NFL draft. McGahee was a first-round pick and will not collect if he can resume his career.
In the days after the championship, Lerner revealed the McGahees had purchased the hefty policy. Since then, inquiries have poured in.
"We're getting more inquiries for coverage, even from high school players who haven't played their senior year," Lerner said. "I recently had an inquiry from a kid that's both a standout pitcher as well as a wide receiver, and his parents are saying, "If my son gets hurt in his senior year, he potentially is giving up a scholarship that's worth $25,000 or $50,000. Is there something that I can provide?' And the answer now is yes. We can offer some policies up to $250,000 for a high school senior. It's staggering, but it's all driven by the money in professional sports."
College disability insurance is a spinoff of that offered to pro athletes. It was touted by a select group of athletic officials and brokers long before last season. Often, schools would call Lerner and other brokers to find out how much a star football player could receive - with some using it to encourage athletes to stay in school.
And it often worked. Florida receiver Taylor Jacobs and running back Earnest Graham played their senior seasons after securing policies. But McGahee's injury reached the masses.
"Until then, it had kind of been a really well-kept secret," said Lerner, who runs Total Planning financial services. "Before, it's been kind of word of mouth - one player going into the NFL, the major-league baseball draft or into the NBA would tell the next player, "Hey, this is something you should consider doing.'
"What happened with the case of Willis McGahee was that it opened a lot more eyes. It's gone from underground to much more mainstream."
Most college athletes obtain coverage through private brokers, who secure policies through various insurance companies, most notably Lloyd's of London.
About 125 athletes annually acquire coverage through the NCAA. It began insuring football and men's college basketball players in 1990 in hopes of stemming unethical conduct by sports agents who were promising disability insurance to help land clients, Sheely said.
The NCAA has expanded its coverage to women's basketball and men's ice hockey. Coverage is determined by where players are projected to be drafted, but unlike private carriers, the NCAA's program covers about 50-55 percent of potential after-tax earnings, excluding endorsements. Nearly 75 percent of its policies are for football players.
Private-company loans for the premium require a parent as co-signer, but the NCAA allows players to sign alone. Both rely on multiple sources, including NFL and NBA scouting reports, to set coverage amounts.
The NCAA closely monitors policies taken out through private companies via university compliance offices, where players must register when obtaining them.
"The insurance amount needs to be commensurate with where the player might be drafted," Lerner said. "If you have a player who is getting a $5-million policy and paying a premium for that, it really needs to be somewhat justifiable in the NCAA's eyes.
"It's my job to rank the player at his position relative to the draft, and that's not an exact science. It's important to be as accurate as possible because they are going to pay (the loan) whether they are in the league or not, so we don't want to have players with loans that ultimately they can't pay back."
Securing a policy isn't easy. Even players who are well-known commodities on big-time college teams have been turned down because their draft status wasn't up to par.
When the 2002 preseason began, McGahee was not listed as a starter and wasn't predicted to be drafted, so he wasn't eligible for the insurance. But 204 yards rushing in a 41-16 win over Florida caused his stock to rise, and by the end of the regular season he was considered a lock for the first round.
The cost of a disability insurance premium for a football player is about $15,000 per $1-million of coverage but can vary depending on the position. Basketball and baseball are less expensive (about $8,000-$10,000) except for pitchers, who pay two to three times more than a position player, Lerner said.
How much coverage a player can expect depends on potential. That's the main reason the majority choose private companies like Lloyd's, which underwrites about 95 percent of college athletic disability policies. They aren't unlimited, but if an athlete's potential is there, he won't go hungry in the event of an injury.
Ten years ago, the most coverage an elite athlete could expect was about $1-million, Lerner said. During the past decade, pro salaries have increased and endorsements are through the roof, and it is reflected in the policies. Lerner has brokered a $4-million policy for a basketball player and several $3-million ones for football players. Three years ago he was negotiating a $7-million policy for Virginia Tech quarterback Michael Vick, which would have been a record. In the end, Vick entered the draft a year early.
"One million dollars used to be the cap, but we're way above and beyond that these days," Lerner said.
But that break-the-bank mentality and the addition of interested high school athletes has led to a decline in the number of carriers and opportunities to purchase policies. Fewer than a dozen specialize in the business full time.
"This market used to be a lot bigger, but it has shrunk recently, as a lot of insurance markets have," Sheely said.
For more than a decade, K&K Insurance in Fort Wayne, Ind., helped underwrite disability policies through various carriers, including CNA. But last year the company stopped. Today it focuses on motorsports.
"The number of claims and the costs of claims, particularly over the past three years, those two issues primarily have caused a number of insurance companies to stop issuing those type (college disability) policies," Lou Valentic of K&K Insurance said. "Those that are still offering the coverage are offering less limits than offered previously, and the rates they are charging now have increased."
"There are fewer insurers of this type around, no question about it," Lerner said. "It's just due to the high risk involved."
Still, athletes are inquiring more than ever.
"Each year, interest is increasing, and it's becoming talked about more in terms of why it's important," Padilla said. "More athletes are investing and becoming concerned about proper risk and investment planning. So the more kids become informed, they understand the reality of why you need the coverage."
"We've definitely seen a rise in interest recently, and both the parents and the student-athletes are becoming much more aware, which is a good thing as far as we're concerned," Sheely said. "Because at the end of the day, it's all about the student-athlete's welfare."