After the final buzzer

“The highest-paid player on an NFL team is the quarterback. What you probably don’t know is the second highest-paid player is the left tackle. This is because the left tackle’s job is to protect the quarterback from what he can’t see coming. That’s why the first check you write is for the mortgage. The second is for insurance.”

This is the opening monologue from the film “The Blind Side,” albeit slightly paraphrased. And what that quarterback — and most athletes — also can’t see coming is the end of his career, particularly if it comes prematurely due to injury.

According to a 2007 study by the University of Colorado, the career of a pro football player is 3.5 years. Baseball players fare slightly better at 5.6 years, though it was also revealed that 20% of all baseball players only spend a single year between the foul lines. So what happens after that? How do athletes maintain the lifestyles they’ve grown accustomed to once those big paychecks stop coming?

The easy answer is, who cares?

After all, since pitcher Nolan Ryan inked that first-ever $1 million contract with the Houston Astros in 1979, it can be argued that pro sports has raised generations of high-priced, overpaid athletes. And based on the skyrocketing salaries being handed out, it’s easy to see how the life of a professional athlete is akin to that of a rock star or Hollywood A-list actor. But the difference is that an athlete’s window of income will close much faster. Very few sports stars will be hitting the stage at 70 like Mick Jagger or directing films at 80 like Clint Eastwood. And while a musician or actor can pretty much control when to call it quits, an athlete may not always have the luxury of choice, particularly if a 250-pound linebacker falls on his leg (see: Theismann, Joe).

Take Cleveland Indians’ centerfielder Grady Sizemore, for instance. Sizemore’s trips to the disabled list are disturbing, considering he missed all of the 2010 season after having microfracture surgery on his knee. He then went on the DL once again, the first month of the 2012 season. The way Yahoo! Sports sees it, “If Sizemore continues to struggle with injuries, he may become another star athlete who never reaches his potential due to injury.”

So what happens when there are no games left to be played for Grady Sizemore and others? How does a player like Sizemore maintain the lifestyle he’s carved out for himself with the more than $23 million he’s earned thus far? Some athletes are wise and acquire a nest egg through smart business investments. But many athletes fall victim to bad advice or their own personal demons (see: former Boston Celtic Antoine Walker). A disturbing report in Sports Illustrated points out that roughly 70% of all professional athletes are either broke or in financial straits within five years of ending their playing days.

Agreed, it is a hard concept to wrap your head around, especially when you consider the $10 million a top athlete makes in a year would last the average working Joe a huge chunk of his lifetime. But that’s only assuming the average working Joe doesn’t own three homes, four cars, a trophy wife, and a lifestyle befitting a twice-monthly paycheck of $384,615.38.

Big paychecks, big risks

This is when an athlete needs to have the financial pieces in place to maintain his lifestyle — or at least a fair portion of it. And this can only come about by realizing that, with a compressed career life span and a susceptibility to career-ending injuries, disability insurance protection is the most critical form of insurance any player can have. This is particularly true in the NFL, where contracts aren’t typically guaranteed and every athlete’s career is literally being held together by a knee ligament the width of a thick rubber band.

Unlike the traditional disability income insurance you might sell to a 27-year-old attorney, business owner or dentist, the disability contracts pro athletes secure are a whole different ballgame. Generally speaking, professional athletes secure career-ending disability insurance protection — most commonly with a one-year elimination period and benefits payable in a lump sum if the player suffers a disability due to either accident or illness, on or off the field. Coverage is usually underwritten for a single-year period each time, and the player needs to reapply each year. The underwriting requirements are much more orthopedic in nature. And if the amount of insurance exceeds a few million dollars, most competent underwriters will require an orthopedic surgeon to conduct an exam for any sizeable policy. Some players (depending on age, contract, sport, position, etc.) may be able to secure disability protection on a multi-year basis, but these multi-year insurance contracts are not available to most rank-and-file professional athletes.

A top NFL player was entering his last season before becoming a free agent. The player had a multi-year offer from his current club for more than $20 million, but he felt undervalued and wanted to test the free agent market at the end of the season. In order to do so, he had to place a permanent total disability policy to protect the money he was leaving on the table. Working with the player’s agent and licensed financial advisor, we were able to place a policy to protect his projected value. The player ended up playing out the season and signing a new contract as a free agent for four years, worth a total $36 million with $23 million in guaranteed money. Recognizing there was still an insurance need to protect the non-guaranteed portion of the new contract, we extended our current policy for another year.

Sometimes the risk is in the free agent years, that season prior to going out on the open market. Traditionally, it is the marquee season for any athlete, the time when his or her market value will often be defined by that season’s stats. So consider how devastating it would be to miss that season with a serious injury.

We worked with a 27-year-old NHL player in that very situation. He was entering his free agent season earning $2 million annually and was looking at a significant pay raise based on his performance that season — unless he went down with an injury. To help protect him from that scenario, we were able to secure for him a one-year term disability income policy that would pay a $4 million lump sum in the event a disability prevented him from signing a new deal the next year.

From athlete to agent

Some athletes use the misfortune that befalls them and turn it into a way to help other athletes who find themselves in the same leaky boat.

Tanyon Sturtze was a former New York Yankee and big league pitcher at the top of his career in 2004, making a none-too-shabby $1.2 million per year and living the lifestyle of a top athlete. Then a series of devastating injuries derailed his career. The next thing he knew, he was trying to rehab in the minor leagues while attempting to maintain a lifestyle that was forged by a $50,000 paycheck every two weeks — a paycheck that was no longer coming.

“Suddenly I’m in the minor leagues, and my paycheck is $10,000 per month,” Sturtze recalls. “Everything changes, and it was a hard adjustment to make. Like most athletes, I never saw it coming. One minute, I’m putting my family on the guest list at Fenway Park; the next, I’m out of the game permanently. I had nothing in place to protect me.”

Sturtze knew he wasn’t alone. He has seen the same scenario befall many of his on-field brethren. So he took steps to help them out by going from pitching 95-mile per hour fastballs to pitching disability insurance for the Hotaling Group, a successful insurance firm based in New York City.

“I tell athletes my story, about what I went through, and explain why they need this protection,” Sturtze says. “There are a lot of athletes out there, and many I played with, that don’t realize what can happen to them if they get hurt and can’t make a living. And it doesn’t have to be on the field. It can be just a freak accident. Strangely enough, I was talking with Jaba Chamberlain just days before he broke his ankle while jumping on a trampoline with his son.

“You just never know when it will all come to an end and that check stops coming in every two weeks. So I tell my clients to make sure they are protected when that day comes, because their lifestyle definitely will change.”

Let’s face it; every time an athlete steps on a field, a court or a sheet of ice, they are one step closer to a career-ending injury. And it’s amazing to note how many athletes fail to realize that a disability insurance policy is every bit as important in protecting their livelihood as a face mask or a batting helmet. Most don’t notice until the day they are blindsided by the worst kind of bad luck. And then everything changes.

By Chris Lack From the September 1, 2012 issue of Life Insurance Selling.  Chris Lack is director of business development for the sports and entertainment division, of Mahwah, N.J.-based Exceptional Risk Advisors LLC.

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