● Sign long-term with the Indians, assuring immediate security but losing the chance for an even bigger payday one year later in free agency.

    ● Purchase a disability policy with loss-of-value (he could borrow from a bank to pay the premium and pay only the interest out of pocket), but forfeit an immediate life-changing guarantee.

Purchasing a disability policy with loss-of-value similar to what Max Scherzer did would have protected him against injury and illness in 2015. And although a disability policy with loss-of-value is more expensive than stand-alone disability insurance and often harder to secure, the idea would be the same: Buy peace of mind and then seek an even bigger payout the following year. 

The disability insurance option would have been a win-win, but sometimes a player decides to go for the sure thing. With just a few days before the opening of the 2015 season, the Indians and Corey Kluber agreed to a five-year,  $38.5 million contract—a bargain price for a Cy Young Award winner when compared to players such as pitcher James Shields, who has never won a Cy Young Award, but who walked away with a contract valued at $75 million over four years.

Organizations and their players don’t always have the same incentives. Teams obviously don’t want their star attractions to suffer career-ending injuries or illnesses, but teams realize they can save money if their players experience a small dip in production when it comes time to draw up the next contract.  

Clubs with disability policies that compensate the organization when their players are sidelined due to injury have an incentive to keep players off the field until they are fully healthy. Jeff Moorad, formerly a minority owner of the San Diego Padres baseball team, recalls a debate over Chris Young, a pitcher recovering from a shoulder injury in 2010. “As a matter of principle, we didn’t stand in his way, and he came back and contributed,” Moorad said. “But the accounting department much preferred that he stay on the disabled list.”

Why aren't more players taking the route that Scherzer took rather than signing below-value, multiyear contracts?  It may be due to the pervasive thinking among athletes that if they get injured or sick, they won't be able to perform at their highest level.  

The fact is, every time an athlete steps on a baseball field, basketball court or ice rink, they face the risk of a career-ending injury. This makes disability insurance every bit as important to protecting the livelihood of an athlete as a football or batting helmet. 

A recent article in The Economist summed it up nicely by stating, “As salaries in professional sports have soared over the past few decades, so has the price tag associated with the risks inherent in such strenuous physical activity. As a result, the economics of the business are now shaped by insurance markets just as they are by TV contracts or ticket sales.”

Sean Callaghan is a client advisor and sports insurance specialist at Exceptional Risk Advisors LLC in Mahwah, N.J. He can be reached at (201) 512-0110 or [email protected]