The cost to insure an NBA star

Since the Raptor’s recent nail-biting 114 to 110 victory against the Golden State Warriors, taking the series 4 to 2, fans have been basking in the glory. But for those of us in the insurance biz, certain questions tend to linger – questions like, “How much does it cost to insure Kawhi’s thighs,” and “What’s the co-pay on those prescription high-impact goggles.”

NBA stars are superb athletes. But pushing their bodies to the limits of human endurance and performance comes with a significant cost in wear, tear, injury, and recovery. Keeping these elite athletes on the court churning out greatness isn’t cheap. The League provides these swooping-hooping machines with the finest coaches, opulent compensation packages, and lastly: world-class medical insurance.

So we decided to take a look and see just what goes into an NBA star’s medical insurance package, and here’s what we found.

What it Takes to Get an Athlete Disability Insurance in the NBA

According to the rules of the National Basketball Association, every team is required to insure the contracts of their top 5 most valuable players (MVPs). The way the rule is written indicates that the five highest-paid players’ contracts must be insured as an inherent component of their compensation package.

That sounds a little counterintuitive. But when you account for the fact that the highest paid players are generally the hardest working players then it starts to make the most sense. The top 5 MVPs are pushing themselves the hardest. Consequently, they will tend to get injured the most. When you look at it from a cost/benefit perspective, it makes sense. Any team’s top 5 guys are the ones bringing in ticket sales, selling the merch, and growing the team’s fanbase.

The league frequently re-negotiates contracts and one insurance company usually gets the lion’s share. That adds up to about 150 to 160 top-tier players getting their insurance through just one company. Historically, these individual policies cost between 4 to 7 percent of the player’s salary. That’s practically insignificant. However, when player’s agents see it in black and white in a proposal from the owners, it plays a big role in who plays for who.

What makes these insurance obligations so interesting is also trade scenarios between teams who both have injured players with guaranteed contracts, where one is insured and the other is not. The trade scenario that sent former Toronto Maple Leaf David Clarkson to the Columbus Blue Jackets for Nathan Horton comes to mind. The Leafs – a larger market team with much larger offers, were able to afford Horton’s uninsured contract and thus able to shuttle off Clarkson’s “unmovable” contract to the frugal Blue Jackets.

Here’s hoping the Warriors have paid their premiums if Kevin Durant and Klay Thompson decide to exercise their player options.

What About Loose Cannons?

NBA Basketball – like most spectator-driven sports – runs on the thrill of the game, drama, and risk-taking. In case you didn’t notice, risk is kind of what insurance is all about. That means some of the best players are going to be a bit difficult to insure.

Players with an exceptionally high injury rate – and those whose style of play incorporates especially theatrical maneuvers – might get rejected by contract insurers. Traditionally, insurance company underwriting the risk would have the right to name 14 specific player exclusions each season.These exclusions can be mind-bogglingly particular, excluding highly predictable injuries to a specific body part on a specific player.

For example, in 2010, the New York Knicks’ Amar’e Stoudemire couldn’t get his knees covered. The man’s knees were notorious for failing in dramatic ways- and no one would cover them. The team had to seek coverage elsewhere, and Stoudemire ended up paying the difference. Although we can assure you, this did not stop him from being a formidable presence on the court.

What About the Other Guys?

Basketball is a team sport, and even a team’s top five can’t carry a game without a strong supporting cast. Players outside of the top five have to buy their own insurance. Because of the special health risks NBA players are exposed to, they generally have to seek out a specialty insurance provider. The upsides are that these guys are still paid extraordinarily well, and they tend to have very few general health risks because of their extreme levels of fitness.

Outlier Specialty Athlete Disability Insurance

Because many sports stars are muscle-bound, adrenalized rock stars making untold millions of dollars, they sometimes tend to live high-risk private lives. For this reason, they sometimes have to be insured for disability insurance, and career-ending incidents (car accidents), as well as insurance against kidnapping/ransom, and extortion.

Thankfully, insuring sports fans is much less complicated than negotiating elite athlete disability insurance!