Friday Feature: How Insurance Is Reshaping NIL Decision-Making
The Legal Takeways from the Latest NIL Drama
Introduction
One of the more underreported shifts in the NIL era isn’t about what deals athletes are gaining or how much colleges are distributing—it’s how those deals, athletes, and institutions are being protected. As endorsement dollars continue to flow to college athletes, many are converting their NIL earnings into loss-of-value (LOV) insurance policies, paying premiums themselves to guard against injury, draft drops, or even career-ending events.
On the institutional side, with the proposed House v. NCAA settlement expected to allow schools to directly compensate athletes, insurance coverage is moving from a health safeguard to a financial strategy. With millions of dollars on the line, both athletes and institutions are reassessing how they manage risk.
From critical injury coverage to transfer risk protection, both parties are preparing for a new era of NIL—where dollars move faster and the stakes are significantly higher.
This marks a major financial and cultural turning point: NIL has given athletes capital, but now it's giving them professional tools and responsibility to match.
Loss-of-Value Insurance: No Longer a School’s Call
Before NIL, LOV insurance was often rare and restrictive. Only athletes with strong pro projections (typically high draft round hopefuls) had access, and even then, the coverage was rare, expensive, and often brokered through a school or governing body. Premiums often ran in the $15,000–$100,000 range, forcing athletes to rely on university goodwill, family support, or NCAA programs with limited reach.
Now, since the NIL era, athletes are closing the gap and using their own profits to acquire insurance policies. Former athletes like Colorado WR Travis Hunter and LSU gymnast Olivia Dunne reportedly used endorsement income to privately purchase LOV policies—turning NIL from a windfall into a safety net.
Athletes are no longer dependent on schools or governing bodies to insure them. They’re making proactive financial decisions and, in some cases, negotiating insurance clauses directly into their NIL deals.
From Scholarship to Salary: The Legal Shift That Triggered Coverage
For decades, schools leaned on the NCAA’s strict amateurism model that barred directly compensating athletes. That all changed in 2021 with the emergence of profiting from an athlete’s NIL, but the income came from outside sources—collectives, brands, sponsors.
However, that firewall is crumbling.
The proposed settlement in House v. NCAA is expected to formally allow schools to pay athletes directly, with total annual compensation capped. That change (which is likely) would end 119 years of no-pay precedent and launch schools into a new frontier—revenue-sharing with legal exposure.
Insurance as Institutional Armor: Schools Get Serious
With large amounts of money on the line, institutions are turning to potential insurance coverages to manage new forms of risk:
Critical Injury Coverage: Policies trigger payments if an athlete misses at least 40% of a season due to a qualifying injury. Players Health offers up to $1 million per athlete, with premiums based on proprietary injury probability scores developed from one of the largest amateur sports databases in the country.
Transfer Risk Insurance: In a world where athletes can enter the transfer portal twice a year, schools face the risk of paying athletes who never suit up. New policies assess likelihood to transfer and offer coverage if athletes leave early, insulating schools from the costs of front-loaded NIL deals gone sideways. An additional protection to possible contract protections.
Contract Protection and Incentive Coverage: Although NCAA rules bar direct performance bonuses, new insurance tools offer schools a workaround. If a player hits market-moving achievements—like winning the Heisman or earning All-Conference honors—the insurer would then pay the school, which would ultimately reinvest those funds into retention or recruiting.
Several schools in the Big 12, SEC, and Big East are already purchasing these policies, marking a broader move toward risk-based NIL infrastructure.
Athletes Use NIL to Insure Themselves
Simultaneously, athletes are embracing their own insurance options with increasing sophistication.
Thanks to growing NIL income and a maturing market, athletes are using their funds to purchase LOV and disability policies without school involvement. These policies are now being tailored to cover:
Sport-specific injuries
Brand or reputation damage
Social media-related revenue loss
Private insurers like Hanover Re, Aon, and Players Health are offering NIL-specific packages—and marketing directly to athletes via agencies. Some bundles include crisis PR, image restoration, and income replacement—effectively arming athletes with tools that were once only reserved for professionals.
Universities Feel the Pressure to Formalize Risk Language
This trend is forcing schools to reconsider how they educate, disclose, and protect their athletes.
Many schools still rely on ambiguous waivers or NCAA-standard health plans that only cover short-term injuries. But with athletes self-insuring and earning real income, there are emerging expectations that:
Schools must disclose coverage limitations
Institutions need to clarify where their coverage ends, and private coverage begins
Recruiting advantages may emerge for schools that offer insurance literacy and education
In response, institutions such as USC, Alabama, and Michigan have begun working with NIL collectives and compliance departments to standardize policy education during athlete onboarding.
The IRS, NCAA, and the Policy Question
Another gray area looms: taxes.
If athletes use NIL earnings to pay insurance premiums, can those be deducted as a business expense? The IRS hasn’t yet provided clear guidance, but NIL advisors increasingly classify athletes as self-employed, which could make such premiums deductible if tied to career or brand protection.
Meanwhile, the NCAA has not updated its insurance protocols to reflect the new NIL reality, leaving much of the regulatory burden on agents, collectives, and third-party risk managers.
What This Means for NIL Contracts, Compliance, and Culture
Insurance is rapidly shifting from optional to essential in NIL planning.
We’re beginning to see:
NIL contracts with mandatory insurance rider clauses
Schools hiring or partnering with managing general agencies (MGAs) like Players Health
Increased legal scrutiny over whether insurance-linked payouts might blur lines around impermissible benefits
Athletic departments now face a new balancing act: protect their athletes and financial interests—without crossing into prohibited compensation territory. Athletes, meanwhile, must manage both opportunity and exposure, ensuring that insurance protections don’t unintentionally void contracts or trigger tax issues.
Future Implications: From Perk to Policy
LOV and risk-based policies were once seen as perks for elite athletes. They’re now fast becoming baseline expectations in any serious NIL package.
We can now expect to see bundled insurance in athlete representation deals, NIL collectives offering policy reimbursements as signing incentives, and even public pressure on lawmakers to codify NIL insurance rights in state and federal policy.
Conclusion
Insurance may not be the flashiest corner of the NIL space, but it’s quickly becoming one of the most essential. As athletes shift from unpaid talent to compensated partners—and as schools brace to absorb that financial burden—risk itself becomes a shared commodity.
The NIL economy now requires a level of risk awareness and planning that mirrors the professional ranks. Where NIL once opened the door to fame and fortune, it now demands foresight and fiscal prudence. Whether insuring against injury, transfer, or underperformance, one thing is clear: the NIL era no longer just rewards talent—it demands protection.
Expect insurance to become a standard feature in every serious NIL conversation by fall 2025. In the new economy of college sports, value must be safeguarded just as fiercely as it’s earned.