From my understanding of it, players rarely collect from these policies. They are more prevalent in football, but I assume they work the same in basketball. There is "Total Disability" protection and "Loss of Value" protection.
Total disability is a career ending injury. This policy only pays out if the injury prevents you from ever playing the sport again. A doctor for the insurance company must agree that you can't come back from the injury and that your career is indeed over. You can't just get hurt and decide not to play anymore. The policy also doesn't usually cover pre-existing injuries, meaning if you've broken or torn something before, the policy won't cover you if you break or tear the same thing.
Loss of Value protects the player from dropping in the draft due to injury. It's based off where they are projected to go and provides payment up to a certain amount should the player get injured and drop in the draft. The drop has to be directly associated with an injury and not any other factors. If you break a leg at the end of the season and then get arrested for drug possession, the insurance company will argue the drug arrest had at least some impact on the drop and won't pay as much. Or if you have a bad season and drop in the draft they won't pay as much, or at all, either.
The premiums for high end accounts can be $20,000 or $30,000. I believe schools are allowed to pay for them for their players. I'm sure companies cap how much a player can take out and adjusts their premiums based on the players potential. Weeds out the fringe guys that might be trying to game the system.
