In a New Twist, Colin Kaepernick’s Disability Insurance Policy Benefits Will Go to the 49ers

According to Albert Breer of the NFL Network and SB Nation, there’s been an interesting development in the world of the National Football League in regards to Colin Kaepernick’s disability insurance policy. Unlike other contracts in the NFL, Kaepernick’s contract stipulates the cost of the policy will be funded by Kaepernick, yet the benefits of the disability insurance policy would go to the San Francisco 49ers should he suffer a career-ending injury. (SBNation, Colin Kaepernick’s contract clause could be the future of negotiations, June 5, 2014)

Many athletes go through a disability insurance expert to purchase an individual policy with the athlete receiving all the benefits and up-side. The policies are separate from both the player’s contract as well as the team. In 2007, NFL Network reported on the $30 million insurance policy purchased by Dallas Cowboys’ quarterback Tony Romo in 2007. Romo’s disability insurance policy is more typical in the sports world but Kaepernick will still be making a jaw-dropping amount of money even with this new contract clause. (NFL Network, Insurance policy all but guarantees Romo will get paid, Oct. 24, 2007 and updated July 26, 2012)

“This policy would pay out $20 million to the 49ers in the event that Kap suffered a career-ending injury at any point beyond the 2014 season through the term of his contract. The reported $61 million in guaranteed money includes $13 million in fully guaranteed compensation, and another $48 million in injury guarantees. The $13 million would cover his signing bonus, his 2014 base salary, and his 2014 workout bonus. The $48 million in injury guarantees would cover his 2015 salary ($12.4M), 2016 salary ($13.9M), his 2017 salary ($16.5M) and $5.2 million of his 2018 salary” (Niners Nation, Making sense of Kap’s disability insurance policy, June 6, 2014)

“As you can tell, Kap won’t be hurting salary-wise but the interesting thing about this policy is the benefits being paid to the 49ers and not to the one who suffered the injury,” states Frank N. Darras, disability insurance lawyer to the pros. “Those of us in the insurance business were intrigued by the workings of this insurance policy. Kaepernick will be the one paying for the disability policy but won’t receive any of the benefits although the majority of his contract is fully guaranteed against injury. Therefore, both Kaepernick and the 49ers will be paid if he suffers a severe injury.”

For star athletes, insurance policies can be a relative proposition, which means athletes have to go through specific insurance companies who are willing to offer career-ending coverage. On average, pro athletes may shell out six figures a year to make sure their livelihood is covered in the event they are injured. With high rates of injury in football, the insurance coverage has been worth the cost when athletes consider their potential income, says Darras.

“I urge any current and future pro-football players to talk with an experienced insurance agent to find out what type of disability insurance policy would be best for them. Since there doesn’t seem to be a precedent for Kap’s contract and disability insurance policy, we don’t know how such a policy will work until more details are made public,” says Darras.