Tony Romo's $30 Million Insurance Policy

For a mere $150,000 Tony Romo doesn't need to worry about getting hurt. If he suffers a career ending injury he'll be fine. If he suffers any injury that effects his earning potential he'll be fine. Romo is insured for $30 million in a "loss of value insurance policy," says Adam Schefter at NFL.com.

Tony Romo is playing for a contract this year. At the end of the season he becomes a free agent. His performance thus far has been superb and he is likely to sign a big contract in the off season. But what if he is to get hurt?

Schefter explains:

Romo’s loss-of-value policy spells out that the quarterback would be eligible to be paid if an injury contributed to a downturn in his performance that affected his value on the open market.

If, for example, Romo broke his pinkie and his statistics slumped, then the quarterback would have a compelling case to collect on his policy.

Plenty of athletes take out insurance policy. According to a story on the Daily Texan it would appear as though half the 2002 University of Miami football team was insured for between two and three million dollars. Romo's teammate Julius Jones is also insured for $2 million.

But those policies are only payable if the player sustains a career ending injury, not a market devaluation injury.

A quarterback is generally thought of as a precious species which makes this insurance policy a large gamble. Likewise, betting on college players to make it to the pros unscathed also seems risky, but the insurance industry knows what its doing.

According to the New York Times, 100 players entered in last year's football draft had an insurance policy. This story is filled with great numbers, such as Brian Brohm, Lousiville's quarterback family considering a $200,000 dollar policy that covers him for $10 million.

The family doesn't have that kind of money lying around, but it is guaranteed at least $10 million as soon as he turns pro, so it takes a small term debt to protect future loss. And the insurance company? Well, let me amend my previous statement, they definitely know what they are doing.

Says the article:

Insurance companies, playing the part of fortune tellers and draftniks, have told Brohm’s father, Oscar, that they will risk millions of dollars to insure the family against the slim chance that Brohm never signs a professional contract. The question facing the Brohms is whether to spend tens of thousands of dollars on an insurance premium when fewer than 1 in 100 insured players ever file a claim.

In case you are wondering, the math is 99X200,000-(10,000,000)=$9,800,000 in the insuranceman's coffers.