Advisor Today - September/October 2012 - (Page 60)
sales and marketing
By W. Harold Petersen, RHU, DFP
Insuring People in the World of Sports
DI insurance can handle the unique risks faced by athletes and the people who manage them.
here was a famous coach of the UCLA Bruins basketball team, who, to this day, holds the record of winning the National College Championship 10 times during his career. He was a superb mentor and motivator to young and old alike. His name was John Wooden, but the world called him “Coach.” Wooden was paid modestly for such incredible accomplishments, but this did not bother him because his evaluations of life’s rewards were not measured in dollars but in knowing that each day, he practiced doing the very best he could. That was a different time, and in collegiate sports today, some coaches are paid unbelievable sums of money, and in professional sports, even more dollars are earned by coaches and athletes alike. Financial risks faced by athletes Although these numbers are high, they must be put in perspective. Whether the athlete is 19 or 39, the reality is that his last paycheck may his last. Though not all athletes are paid on a game-by-game basis, most are contracted to sustain performance standards, usually on a multi-year basis. There are many variations in contract terms, but it is generally stipulated that an athlete may be released from the contract should he be placed on the disabled list. Another area of risk that can be mitigated by insurance is the signiﬁcant incomes earned through product endorsements. But what happens when a star athlete gets into trouble? Such an act may jeopardize an endorsement contract. Disgrace insurance can support the replacement of that income should it be diminished or lost. The money that athletes are paid must be used to create a lifetime of income. Even with expert advice, this
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can be difﬁcult because of the following: 1. The athlete is at higher risk of falling victim to a career-ending injury or illness before earning enough money to fund a satisfactory retirement. 2. Temporal temptations such as the acquisition of cars, boats, planes and jewelry, often override the effort to save and invest. 3. The earned income is gross income. It must be used to pay agents, business managers and advisors. 4. Most people are in occupations that have a 30- to 40-year lifespan to create savings. An athlete typically has fewer than 15 years to reach this goal. 5. The challenge of creating and funding a sustainable passive income for retirement is more difﬁcult for the athlete who will retire around age 35. DI to the rescue The most serious peril for the athlete is his career being cut short by disability. He faces forced retirement with each day at work, but DI insurance can offset the great compensation that would be lost. This highly important coverage brings about the recognition of a business opportunity, where tall beneﬁts equal tall premiums and tall commissions. Uncommon risks such as these can be handled by professional insurance advisors. Athletes are typically served by brokers whose practices are not necessarily limited to serving athletes only. This arena presents a proﬁtable source of business for many advisors. An interesting challenge that underwriters in this area face is adjusting to a plan that does not work on the law of large numbers. In a DI insurance plan, where common occupations are insured, the underwriter attempts to insure thousands of individuals, usually with modest beneﬁt limits. Professional athletes defy this design as relatively few
people possess the required skills, and the size of the beneﬁts must properly replace the vast incomes found in professional sports. The risks are high and abnormal. Expertise and daring are required to bring forward a plan capable of handling the dimensions of the risk. Fortunately for the athlete, there are speciﬁc underwriters who can and will rise to the challenge, making navigating the ﬁeld of sports DI insurance simple and rewarding. The athlete is only a piece of the professional sports pie. Numerous staff members are required to recruit, train, organize, equip, schedule, care for and rehabilitate the athletes. There are wellcompensated coaches, physicians and many others who will be interested in insuring their future with DI insurance. They and the athletes need an advisor to bring to them the necessary income protection through disability ﬁnancial planning. ■
Harold Petersen, RHU, DFP, is a 63-year veteran in the insurance business. He founded the ﬁrm, Petersen International Underwriters, which insures special risks using the ﬁrm’s proprietary Disability, Life, Medical and Contingency Insurance plans for individuals, groups and businesses. For more information, contact PIU by phone at 800-345-8816 or by email at firstname.lastname@example.org.
Table of Contents for the Digital Edition of Advisor Today - September/October 2012
From The Editor
Making the Transition
Will We Avoid the Fiscal Cliff at the End of 2012?
Boosting Retirement Plan Participation
Protecting Younger Workers’ Greatest Asset
From Term to Perm
Demystifying Life Insurance
Four Under Forty
My Best Sales Ideas
NAIFA Government Relations
Insuring People in the World of Sports
Advisor Today - September/October 2012