Should High School Student-Athletes Insure Against Lost Scholarships?

Athletic scholarships make the promise of an education available to high school students who might otherwise be unable to afford the schools that recruit them. That promise may go unfulfilled if a high school senior sustains a serious injury prior to National Signing Day. Verbal scholarship offers can be withdrawn at any time before a letter of intent is signed. Some offers are withdrawn when student athletes can no longer play the sports for which they were recruited.

The EPIC Sports & Entertainment Group has developed an insurance product called “Education Protector” that is designed to fund an education if a high school student’s scholarship offer is withdrawn due to injury. For a premium of $749, the company will provide $200,000 to students who have been offered a scholarship if the offer is withdrawn before a letter of intent is signed, provided that the offer is rescinded due to an injury. EPIC says it will pay the claim even if the injury is not sports-related. If the offer is withdrawn for any other reason (such as student misconduct), no insurance benefits will be paid.

Benefit or Scam?

The program is controversial. Critics argue that students are buying nothing with their premiums because colleges and universities have a history of replacing athletic scholarships with medical scholarships if a student athlete is injured before signing a letter of intent. Since medical scholarships do not count against the number of athletic scholarships authorized by the NCAA, they permit the institution to recruit a replacement player while honoring the commitment to give the student an education.

Whether or not it is true, no college or university wants to be seen as valuing sports more than education. A decision not to award a medical scholarship to an injured recruit impairs the institution’s reputation. It also hurts a coach’s ability to recruit student athletes who have reason to fear they will be treated in the same way if they are injured. For those reasons, it is uncommon for an institution to admit that it is denying an education to a student athlete because that athlete was injured before signing a letter of intent.

Evaluating Risk

Not even 1% of student athletes will play for a professional team. They may view sports as their ticket to fame, but their meal ticket is likely to be a college degree. Students who are realistic about their future enjoy their athletic participation while remaining focused on graduating so they can get a job.

Understanding that education is the road to success that their children will most likely travel, parents may be happy to spend $749 if that investment guarantees that their son will be able to attend college after blowing out a knee. While most high school students avoid the kind of injuries that diminish or end their ability to play a sport, nearly 150,000 California residents who are 22 or younger suffer sports injuries every year that require emergency room treatment. It is not surprising that there is a market for EPIC’s product.

The High School Version of College Athlete Insurance

College athletes who expect to be high draft picks often purchase insurance that protects them if a career-ending injury destroys their ability to be drafted. That insurance may cost the student athlete as much as $50,000. Some universities have fashioned ways for that cost to be paid by the school rather than the athlete.

California enacted a law in 2012 that requires the four California Pac-12 schools to pay insurance premiums for low income athletes. It also requires the school to continue providing a scholarship until the student graduates if an injury forces a scholarship student to leave the athletic program. No similar law protects high school athletes.

Will Claims Be Paid?

Colleges and universities are increasingly aware of their bottom lines while competing against each other for top high school athletes. Despite the money that successful athletic programs earn, it is reasonable to assume that some athletic scholarship offers are withdrawn due to student injuries and are not replaced with medical scholarships. Institutions of higher learning may have little incentive to give a free education to a high school student who had mediocre grades and is perceived as unlikely to succeed if that student cannot enhance the school’s athletic program.

Coaches withdraw scholarship offers for a number of reasons. A coach who wants to withdraw a scholarship because an injury has reduced a student’s athletic potential may feel pressured by the threat of bad publicity to invent another reason for the change of heart. If that happens, there is a significant risk that insurance proceeds will not be paid.

The Managing Principal for EPIC insists that the likelihood a coach will invent fraudulent reasons for rescinding a scholarship is small. He also claims that EPIC has created proprietary (and thus secret) investigative methods that will assure payment of claims if scholarship offers that are withdrawn due to injury, even if the school misrepresents its reason for rescinding the offer.

Insurance companies make money by collecting and investing premiums, not by paying claims. It is unclear what incentive EPIC has to question an explanation for withdrawing a scholarship offer if the explanation allows EPIC to avoid paying the claim. There may be instances, however, in which an injured student athlete will bring legal action against the school for misrepresenting its reason for withdrawing a scholarship offer and against EPIC for failing to recognize that the offer was rescinded due to the athlete’s injury. How courts will respond to those intriguing legal issues remains to be seen.