Jump to content

Cap Relief thru Insurance


Recommended Posts

Never knew about this that it can provide the team cap relief.  I wonder if this could help the Fish with the Tua situation??  Oh and last year, the Jets didn't buy a policy for Rogers!

 

The CBA labels insurance proceeds as a "refund from the player," which qualifies the amount as a cap credit for the club for the following season. In the simplest terms, if a player who eats up a significant portion of a club's salary cap misses significant time with injury or illness, a club doesn't have to take it as a total loss, but can recover space for the following year. Plus, insurance premium payments don't count against the salary cap.

 

"That's the crux of the loophole," the former club executive said. "You effectively can use cash to create cap space from scratch. In a closed system, that is one of the few ways to buy cap space."

 

https://www.espn.com/nfl/story/_/id/41274295/nfl-insurance-policies-star-players-aaron-rodgers-tua-tagovailoa-jared-goff-joe-burrow-christian-mccaffrey

Edited by Ed_Formerly_of_Roch
  • Like (+1) 2
  • Awesome! (+1) 1
  • Thank you (+1) 2
Link to comment
Share on other sites

1 hour ago, Ed_Formerly_of_Roch said:

Never knew about this that it can provide the team cap relief.  I wonder if this could help the Fish with the Tua situation??  Oh and last year, the Jets didn't buy a policy for Rogers!

 

The CBA labels insurance proceeds as a "refund from the player," which qualifies the amount as a cap credit for the club for the following season. In the simplest terms, if a player who eats up a significant portion of a club's salary cap misses significant time with injury or illness, a club doesn't have to take it as a total loss, but can recover space for the following year. Plus, insurance premium payments don't count against the salary cap.

 

"That's the crux of the loophole," the former club executive said. "You effectively can use cash to create cap space from scratch. In a closed system, that is one of the few ways to buy cap space."

 

https://www.espn.com/nfl/story/_/id/41274295/nfl-insurance-policies-star-players-aaron-rodgers-tua-tagovailoa-jared-goff-joe-burrow-christian-mccaffrey

 

 

That's really interesting. Thanks for posting it.

 

It isn't clearly stated that there is a rate at which insurance is deducted from the cap. Does anybody know if there is one? Is it 100%? For example, if you insure your QB for $10M, and he gets injured, do you get $10M in cap relief? 50% of $10M?

 

The articles says, "a club doesn't have to take it as a total loss, but can recover space for the following year."

 

That would seem to mean that the loss is partial, but does that only mean that if you miss half the season you only get credit for half the cap space?

 

Wish it was more clear.

 

It's a bit of a competitive advantage for richer teams. If the particular insurance costs $1 - $4M as it says the Jets would have had to spend, and those payments don't cost against the cap, then teams get an advantage on the cap by spending extra money outside the cap.

 

 

  • Like (+1) 1
Link to comment
Share on other sites

34 minutes ago, Thurman#1 said:

 

It's a bit of a competitive advantage for richer teams. If the particular insurance costs $1 - $4M as it says the Jets would have had to spend, and those payments don't cost against the cap, then teams get an advantage on the cap by spending extra money outside the cap.

 

 

Heaven forbid if rich owners did not have advantage.  Jerry Jones who has his own marketing agreement outside of NFL would not want to be part of league which didn't.

Link to comment
Share on other sites

8 hours ago, Thurman#1 said:

 

 

That's really interesting. Thanks for posting it.

 

It isn't clearly stated that there is a rate at which insurance is deducted from the cap. Does anybody know if there is one? Is it 100%? For example, if you insure your QB for $10M, and he gets injured, do you get $10M in cap relief? 50% of $10M?

 

The articles says, "a club doesn't have to take it as a total loss, but can recover space for the following year."

 

That would seem to mean that the loss is partial, but does that only mean that if you miss half the season you only get credit for half the cap space?

 

Wish it was more clear.

 

It's a bit of a competitive advantage for richer teams. If the particular insurance costs $1 - $4M as it says the Jets would have had to spend, and those payments don't cost against the cap, then teams get an advantage on the cap by spending extra money outside the cap.

 

 

 

This seems to shed more light on it...

 

"One club executive estimated the cost of a premium has increased around 30% to 40% in the past five years. Per insurance industry sources, if a club wanted to insure $40 or $50 million of a contract, it would cost them somewhere between $1 or $2 million per year.

 

The Niners' 10-year total in end-of-year adjustments is $54.3 million, double the second-place team's total. This number isn't only insurance credit, but representative of other savvy cap hacks that benefit teams when players get hurt, such as paying salary in the form of per-game roster bonuses. Philadelphia's $19.1 million over 10 years is good for sixth."

 

https://www.espn.com/nfl/story/_/id/41274295/nfl-insurance-policies-star-players-aaron-rodgers-tua-tagovailoa-jared-goff-joe-burrow-christian-mccaffrey

 

Allen makes the list for top insured players - Mahomes is likely in there somewhere but the value of the insurance isn't specified in his contract so it can't be used in the chart below:

 

image.thumb.png.7431374cca4a7dc9aea21db969779ce2.png

Edited by Big Turk
Link to comment
Share on other sites

7 hours ago, Desert Bills Fan said:

Too bad Bills didn’t buy a policy on Von Miller…….

Screw dat...Kevin Kolb! 😁

1 hour ago, stuvian said:

So the Jets willfully and knowingly left their team exposed to Rodgers injury. Their complete and total incompetence on and off the field is why I never fear them overtaking us no matter how many big names they sign. 

image.jpeg.5d49f4c26a502c8cb48dd0f9ac68cb24.jpeg
"I'm Woody Johnson, and I approved this posting!"

  • Like (+1) 1
  • Haha (+1) 1
Link to comment
Share on other sites

10 hours ago, ControllerOfPlanetX said:

I’d like to meet the actuaries at the insurance companies handing out these policies.

 

1 minute ago, ProcessTruster said:

I'm sure the premiums are pretty stiff

They're the actuaries that are driving $2 million Bugattis...😁

  • Like (+1) 1
Link to comment
Share on other sites

This is a great topic for this forum.  I remember reading about this a while ago and completely forgot about it.  There is a break even point between the salary/cap space saved and the cost of the policy.  Therefore, it only makes financial sense for the most highly paid guys.  There are also some owners that operate on a limited cash flow basis like Bengals and the Raiders that make limited use of this provision.  The provision was mainly introduced to help protect the competitive viability of a franchise that loses highly paid guys who may also have a lot of guaranteed contract money.  The premise of the provision makes sense but I think the wealthier owners could potentially disregard the financial costs and buy cap space as one of the other posts alluded to.

  • Like (+1) 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
×
×
  • Create New...