New York Yankees third baseman Alex Rodriguez–in year two of a10-year, $275 million contract that could pay as much as $305million with bonuses–sent a scare through the organization and thesports contract insurance market when it was announced in Marchthat “A-Rod” would need surgery on his hip, costing him at leastone-quarter of the baseball season.

While the injury is not expectedto affect Mr. Rodriguez long term, what if the injury had beenworse? What if the most expensive player in baseball was forced tomiss half of the season, or all of the games? Even worse, what if,in the second year of a decade-long contract, A-Rod suffered acatastrophic injury that ended his baseball career?

The Yankees are not the only team in sports that have toconsider such a worst-case scenario, as almost all have locked upone or more of their star players for a significant amount of yearsin mega-buck deals. And baseball is not the only sport where suchexposures are proliferating.

In the National Hockey League, these types of contracts arebecoming increasingly popular for star players. For example, in2008, the Washington Capitals signed Russian superstar AlexanderOvechkin to a 13-year contract extension worth $124 million. InDecember 2007, the Philadelphia Flyers signed now-captain MichaelRichards to a 12-year extension worth $69 million.

And in 2006, The New York Islanders signed goaltender RickDiPietro to a previously unheard of 15-year deal worth $67.5million–the longest NHL contract ever singed. (The Islanders wereno strangers to long-term commitments, signing Alexei Yashin to a10-year deal in 2001.)

Sometimes, as in the case of Mr. Rodriguez, an early injuryshows the risk that comes with offering such long-term contracts.The Islanders, too, have seen injuries plague their own long-terminvestment in Mr. DiPietro, who has suffered through multiple hipand knee surgeries, as well as multiple concussions since signinghis landmark deal.

So how do teams and players protect themselves? The answer, ofcourse, is the way any person or organization protects assets–bybuying insurance.

But long-term contracts do cause some extra work for insurers.Indeed, the longer a carrier is locked in, the more uncertaintythat carrier is exposed to, noted William Hubbard, chair of theWakefield, Mass.-based specialty underwriting agency HCC SpecialtyUnderwriters.

Mr. Hubbard said he would prefer to write coverage for contractson a year-by-year basis, but he understands that is not realistic.However, he insisted he is not willing to go out as far as 10-to-15years on any one player's sports contract.

Citing a hypothetical situation that could be representative ofthe norm, Mr. Hubbard said HCC would agree to write perhaps threeyears of a 10-year contract. The team could buy coverage for thefirst three years and then self-insure the back seven, Mr. Hubbardsuggested–or the contract could be structured so that if acareer-ending injury occurs in the first three years, the insurancewould pay out the remaining seven years.

At the end of the three years, Mr. Hubbard said, HCC couldchoose to extend coverage.

Anthony R. Caruso, who is a former agent, mostly in the NFL, andnow chair of the sports and entertainment group for law firm Archer& Greiner P.C., said he believes long-term contracts can causesome issues with respect to insurance.

He said that as an agent, he was not deeply involved withinsurance issues, but he brought up one point with long-termcontracts that was also cited as a primary underwriting factor byinsurance experts–the age of the player. Age, Mr. Caruso noted, isa big factor in sports and can come into play when consideringcoverage over a 10-year contract versus a four-year contract withoptions.

“My take on it,” he said, “is anytime you have a longer periodto cover an asset, you're going to have greater concerns.”

But Peter Nash, managing director of Lloyd's syndicateSportscover, which is based in Melbourne, Australia, said he willinsure a long-term contract as a “guaranteed renewable,” similar tomany shorter-term contracts in the United States. As a guaranteedrenewal, the insurance provider agrees to cover the contract forthe full term–but reserves the right to adjust the premium everyyear to effectively underwrite the risk.

Mr. Nash said this differs from insurance for a soccer player inEurope, for example, who can secure coverage for a $5 millioncontract with a five-year term if the player is unable to continueplaying.

With many U.S. contracts, he explained, coverage in the case ofa career-ending injury is for an agreed lump sum that is not thesame as the full contract.

Career-ending injuries are not the only condition that triggerscoverage, experts noted. Insurance will also cover a prolongedinjury after a certain amount of time missed, with that amount oftime varying depending on the contract.

For example, Mr. Hubbard said a baseball player's contract maytrigger coverage after half of a season is missed with a coveredinjury. In the case of a baseball injury, the team would pay thecontract for the first 81 games, and the insurance would kick infor each game missed after that.

The amount an insurer will pay out in this case depends on thecontract, Mr. Nash explained. In the event a player cannot dressfor games, he said insurance could pay for 50- or 75 percent of thecontract–or whatever amount is agreed upon beforehand.

Speaking about the coverages typically involved in a sportscontract, Mr. Hubbard said the primary cover is accidental deathand disability, regardless of whether it's a two-year or 15-yearcontract.

Mr. Nash said some contracts could involve other liabilitycoverage, such as injury to other players. This, he said, is notseen much in the United States. But in Australia, for example, hesaid some athletes seek personal liability coverage for an injuryto another player stemming from negligence on the part of theinsured player.

Additionally, some contracts for baseball players carry standardpersonal accident coverage for an athlete's family, Mr. Nash noted.Occasionally for hockey contracts, he added, medical coverage willbe included for the player and the player's family.

Coverage is also offered for contract bonuses, where if thebonus is achieved, the coverage kicks in. Mr. Nash said thiscoverage is underwritten similar to “hole-in-one insurance” seen inspecial events coverages.

When writing this type of coverage, Mr. Nash said an insurerwould charge a premium based on the likelihood of achieving thebonus. “We don't insure certainties,” he said.

For a premier player like Mr. Rodriguez, for example, Mr. Nashsaid he would look into and gain an understanding of the historicalstatistics when considering the likelihood of reaching a bonus.

When underwriting a sports contract in general, Mr. Nash saidthe age of a player is the biggest issue. Additionally, the type ofsport is considered. Golfers and tennis players, Mr. Nash noted,are not as likely to injure themselves as football, hockey or evenbaseball players.

Drilling further down, Mr. Hubbard said underwriting also takesinto account the position an athlete plays within the sport, theteam's medical facilities and the quality of medical staff a teamhas, and the length of the season as well as off-fieldbehavior.

On this last point, Mr. Caruso noted that sports contractsprevent players from performing in some off-field activities–skydiving being one of the common prohibited hobbies. But he notedthat some teams do not even want players participating in a pickupbasketball game in their off hours, noting that more than one havetorn up their knees in such extracurricular activities.

These types of conditions in contracts all come down toleverage, according to Mr. Caruso. If an athlete is a top-nameplayer, he or she will probably have more of a say in contractstipulations. But a seventh-round pick, he added, will not likelyhave much leverage in changing provisions.

Longevity in a sport could come into play for a long-termcontract, as Mr. Nash noted that most insurers would be interestedin a renewable contract on a golfer, for example, who typically hasgreater longevity than the average hockey player.

In general, Mr. Hubbard said the market for writing sportscontracts is small and not growing. He said it is hard to think ofwhat new insurance players could offer other than lower prices anddeductibles. “History shows that's a recipe for disaster,” headded.

Mr. Nash, though, said the market is getting more competitive assports becomes a bigger and bigger business. He said as the moneyoffered in sports contracts increases, as it has over the last 25years, the need for protection increases, presenting opportunitiesfor carriers.

With respect to long-term contracts, he said it is one in aseries of new wrinkles and ideas in the world of sports contracts.As sports continue to evolve as a career path, he added, moreagents, managers and teams will develop more new coveragetwists.