Insurance On Athletes Now A Thing Of The Past?

Insurance used to be a given. When a team signed a big guaranteed contract, they'd get it insured as much as they could. But times have changed. Last month, I was told that more and more baseball teams were passing up on insurance.

Based on the tip, I asked Cleveland Indians general manager Mark Shapiro at the Princeton Sports Symposium earlier this month about what the team did with insurance. His answer? For the most part, they don't insure.

Five days later, the Indians signed Kerry Wood to be their closer.

Wood's signing is significant because it almost had to be done by a team that didn't care to back up its investment. Why? Because Wood has had Tommy John surgery on his right elbow and has been on the disabled list 12 times in 10 years. No insurance company would insure a career-ending injury with Wood because the odds are just too high.

Shapiro said if the team is willing to take a risk, they do it. They give the guy a physical, they evaluate medical records and if they take a chance, that's exactly what it is.

The Indians "insurance" appears to come in the form of the third year of the contract, which pays out $20.5 million for the first two. If Wood is good, the team can pick up an $11 million option, a price that will be locked in only if he finishes 55 games in either of the first two years of the deal.

Rich "Big Daddy" Salgado of Coastal Advisors LLC, which insures disability and life insurance policies for players, says that teams started hesitating more about insurance after premiums skyrocketed following Sept. 11, when capacity for the entire industry was reduced by the claims.

Questions? Comments?