The $3,000,000 Knee Loss-of-Value Insurance Policy -

The $3,000,000 Knee Loss-of-Value Insurance Policy

The NCAA defines Loss of Value insurance as “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.”

University of Michigan tight end Jake Butt took the high road by playing in the Orange Bowl, but he paid the price for his commitment to his school – and cost himself an early-round position in the NFL draft – when he blew out his knee in what was essentially a meaningless game. Leonard Fournette and Christian McCaffrey made the decision to sit out their chances to compete in bowl games to avoid injury, and Butt shredded his ACL.

But at least he had an insurance policy to fall back on.

The upside to all this? Butt had the good sense to sign up for an insurance policy, and that proved prescient indeed.

When the Denver Broncos finally took a flyer and used a fifth-round pick on Butt, it meant the tight end raked in $543,000, tax-free. The payout came as a result of Butt’s drop in projected draft position. His insurance policy paid off to the tune of some $10,000 for each pick that passed after the middle of the third round, and should Butt have dropped even further, his “loss-of-value” insurance policy could have paid off a total of up to $2 million.

If Butt had skipped the bowl game and stayed healthy, insiders say he would surely have been a top-75 pick could possibly have been selected in the first-round, but his insurance policy meant that, as each pick passed, Butt was making bank. According to ESPN, the Broncos got a bargain pick should the tight end’s ACL recovery goes as expected.

Keith Lerner wrote a similar policy for Willis McGahee last year, and he said the industry has changed dramatically players opt for the “loss-of-value” insurance. Lerner says schools are willing to cover the cost of premiums. Operating from their company, Total Planning Sports Services, Lerner and his son spend a portion of each year visiting schools to lay out the insurance options to top pro prospects during their draft-eligible year.

Lerner knows the business well as he wrote policies for all the last three Heisman Trophy winners – Jameis Winston, Marcus Mariota and Derrick Henry – and he also wrote the policy for Oregon cornerback Ifo Ekpre-Olomu.

Ekpre-Olomu became the first football player to collect on a loss-of-value policy when he plummeted in his draft position following an injury. He was rated as one of the top cornerbacks in college football when he tore his ACL and dislocated his knee in December 2014. After falling to the seventh round of the draft, underwriter Lloyd’s of London ultimately paid Ekpre-Olomu $3 million.

(Photo by Gregory Shamus – Getty Images)