Originally posted on Mets Merized Online  |  Last updated 3/28/13
Adam Rubin of ESPN New York, does a fine job of explaining why the Mets chose not to insure Johan Santana’s contract. The Mets will be on the hook for the remaining $31 million owed to Johan Santana because they did not insure the contract.  Why? As premiums have skyrocketed because of escalating salaries and past payouts — such as the bailout when Mo Vaughn was owed $17 million and could not play for the Mets in 2004 — the organization began more often “self-insuring” its larger contracts than seeking outside coverage. In essence, the Mets chose to create a rainy-day fund available so that the organization would not be crippled financially by the loss of a key player due to injury. It saves potentially a $2 million insurance premium per year to protect a contract, although the amount annually paid to an insurance company naturally decreases as the years on the contract elapse — like you’d pay less to an insurance company on a car as the years go by and the vehicle is worth less. Across
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