Yellowstone Financial, Inc.

Disability Insurance and Alec Burks

The crowd groaned as University of Colorado basketball star Alec Burks hit the floor hard in the Big 12 semifinals against Kansas. His family watched from courtside while he lay motionless on the floor.

Thoughts of CU’s chances in the championship tournament and an expected bid to the NCAA tourney were secondary as onlookers were concerned about his well-being. Alec’s family had an additional worry — his financial livelihood.

A unanimous Big-12 first team selection this year as a sophomore, Burks is getting the attention of pro scouts across the country. Burks announced last week that he would leave the Buffs and enter his name in the NBA Draft.

Many feel he could be a first round selection in the next draft — possibly even a coveted lottery pick. Some experts project he will earn $3 million a year to start with pay increasing sharply from there.

Burks ended up shaking off the hack and played out the game with no lasting consequences. But what if he weren’t able to continue playing at the same level? It would a personal and financial tragedy.

Many Buff fans were hoping that Burks would stick around CU for another year to work on his game and build on the foundation of a deep NIT run.

In financial terms, the situation Burks confronted was much like that of a surgical resident. They are both extremely talented and have worked hard all of their lives. They are being paid far less than they are worth.

Burks gets the scholarship and support at CU, while the resident might earn $50,000 a year. Yet both are on the brink of getting a huge pay raise as they move to the “pros.” The surgeon may only pull in one-tenth of Burks’ projected annual contract, but will enjoy a longer career than the average NBA player. Like Burks, a resident may be one accident away from lifelong financial hardship.

How do we protect future income streams that bear no resemblance to current pay? Burks and the resident could purchase disability insurance policies on their future earning potential. Like many people early in their career, their greatest assets by far are their future earnings.

The NCAA sponsors a disability policy made available to exceptional athletes in high earning sports. Burks could possibly purchase a $5 million policy that would pay out if sickness or an accident prevented him from playing in the pros.

How is a college student going to come up with $50,000 to pay the insurance premium? Burks could get a loan through the NCAA program, which would be due once he signed a pro contract or exhausted his collegiate eligibility. Additional coverage of $10 million or more could be available through Lloyd’s of London or Chubb, both of which specialize in cases that are hard to underwrite.

Surgical residents would not be able to purchase as much coverage as Burks, but may find the premiums to be more affordable. The big challenge is finding a carrier that will write coverage based on their earning potential instead of the relatively modest salary earned in residency.

What lessons can we learn from these nascent earning superstars? While you may not be a future NBA guard or a brain surgeon, if your work benefits do not include a disability policy sufficient for your and your family’s needs, you should investigate one on your own. You’ll be protecting your largest asset — the money you haven’t earned yet.

Dave Gardner, for the Daily Camera.