Protecting Professional Athletes Entering Retirement

The shelf life of a professional athlete is relatively short. Careers can span decades, or they can be as brief as one game. Career-ending injuries, multiple trades, league mandated shut-outs, family & legal disputes, and other liquidity events can put a detrimental cap on earning potential, and send many athletes and their families into panic mode. “Where can we save money?” “What expenditures can we do without?” “Can we cut corners on our insurance?”

These questions are all too common with individuals and families that have to evaluate their expense management vs. their wealth protection. Poor decisions, poor planning and poor advisory from others can have a devastating impact on the financial success and security of a professional athlete and their family. Protecting that asset base is critical to a successful retirement that could easily span another 40 or 50 years, or more.

From a wealth protection standpoint, one of the most serious threats to net worth involves lack of adequate insurance coverage and exposure to liability lawsuits from a variety of causes: auto accidents, slips and falls at home, disgruntled domestic staff, a small side business, volunteer work at a favorite charity, and more.

Another major threat involves property loss at home. Most successful athletes in or near retirement have full equity in their main residence and other properties they may own. Although this equity typically represents a large portion—if not the largest portion—of their net worth, many do not carry enough insurance to fully rebuild their home after a total loss. The contents of the home can also be significantly underinsured. A study of high value homes found that nearly half had insufficient coverage for contents, and the average amount of underinsurance was $600,000. Home contents may also include collections of fine art, jewelry, wine, valuable sports memorabilia and other valuable items that have taken years to amass.

From an expense management perspective, financially successful people in or near retirement often overlook easy savings opportunities in their personal insurance program. They carry policy deductibles that are too low. They fail to take advantage of package discounts by combining their policies with one carrier. They do not claim credits for alarm and other safety systems in their homes and autos, and they insure rarely driven classic cars with standard auto policies.

To help retirement planners and their clients address these issues, this white paper presents 18 steps to strengthen wealth protection and reduce expenses when working with Swingle Collins on a personal insurance program. In combination, these steps can maximize the value of insurance expenditures and help financially successful people prepare for and thrive in retirement.

  • Approve annual or bi-annual meetings with your insurance agent to discuss changes to your personal insurance portfolio.

  • Introduce your financial, personal and legal services ‘team’ to your insurance agent: Attorney, CPA, Financial Planner, Personal Assistants, etc.

  • Manage sales records and installation slips for high-end appliances and service contracts.

  • Purchase enough umbrella liability insurance to match assets at risk.

  • Seek full replacement cost coverage for the home and other structures.

  • Ensure that the homeowner policy includes sufficient coverage for building code upgrades.

  • Take an inventory of home contents and make sure the coverage limit for personal property matches its replacement cost.

  • Use the added protection of a valuables policy for jewelry, art, wine, and other precious collections, and keep an inventory and record of item/set appraisals.

  • If the home is part of a property association, make sure the homeowners policy includes ample coverage for loss assessments.

  • Address the need for director’s & officer’s liability if volunteering as a board member or trustee of a charitable organization.

  • Attend to liability risks originating from hobbies turned into small businesses.

  • Name trusts and limited liability companies (LLCs) on insurance policies.

  • Increase homeowner and auto deductibles to lower annual premiums.

  • Bundle separate policies with the same insurance company.

  • Verify with your insurance agent that your household pets are not on a restricted list.

  • Get credits for hail resistive roofing materials, loss prevention systems, and upgraded plumbing, electrical, and heating systems.

  • Insure classic autos with a classic auto policy, not a standard auto policy.

  • Discuss significant liquidity events with your insurance agent and ensure that timely communication is given on the purchase or sale of assets.

At Swingle Collins, we manage a specialty program for insuring professional athletes and their families. We are here to address changes at all stages of an athlete’s career to protect their assets and ensure a sophisticated, innovative, long-term partnership.

Author:  Jason M. Pond, Personal Risk Management

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