In the doldrums of the NFL offseason, when transactions are scarce and the gridiron lies dormant, it’s the perfect time to delve into the inner workings of the league. I reached out for your burning questions, and amidst the sea of inquiries, a particular topic stood out like a shining star on the field.
There has been a buzz surrounding an ESPN article penned by the esteemed Kalyn Kahler, shedding light on the intricate world of insurance and its potential impact on teams’ salary caps. This peek behind the curtain has left many wondering about the nuances of this practice. Allow me to provide some clarity.
While the idea of “buying cap space” may sound like a bold strategy, in reality, it boils down to a calculated risk assessment undertaken by each franchise. Is it worth shelling out hefty insurance premiums (with funds outside the salary cap) for the slim chance of receiving future cap relief? Some teams opt to insure multiple players, while others focus solely on their star quarterbacks. And then there are those who steer clear of this market altogether.
The crux of the matter lies in the type of insurance being purchased and the associated costs. Permanent Total Disability (PTD) insurance offers reasonable premiums but minimal payouts, given the rarity of players being permanently disabled from the game. On the other hand, Temporary Total Disability (TTD) insurance, which is more likely to trigger payouts due to the inherent injury risk in football, comes with steep premiums. Not all insurance companies offer TTD, and those that do may impose exclusions for preexisting injuries.
According to Kahler’s article, the premiums for TTD insurance to cover a $50 million contract could soar as high as $2 million. However, the payout is far from straightforward, with clauses, deductibles, exclusions, and various hurdles complicating the process. Insurance companies are notorious for their reluctance to part with money, making the road to a successful claim a challenging one.
During my tenure with the Green Bay Packers, I opted for PTD policies for several major contracts, including that of the legendary Brett Favre. However, the feasibility of investing in high-premium TTD coverage eluded me, as the risks outweighed the potential benefits.
So, as the NFL landscape lays dormant, obscured by the offseason haze, the world of insurance and its impact on team finances offers a glimpse into the strategic maneuvers of the league’s front offices. And as we await the return of the gridiron battles, the behind-the-scenes machinations continue to shape the destiny of teams on and off the field.
