There is a league-wide policy that insures the contracts of around 150 players each season. The five most expensive contracts for each team are included, and teams have the option of submitting additional names for coverage. The carrier has the right to exclude 14 contracts per season, such as when they consider a player with a very large remaining contract to be a medical risk. For example they excluded Luol Deng in 2008-09 because he had $71 million remaining and a history of back injuries. The list of excluded players changes each year, so a player who is not covered one season might be covered the following season.
If an insured player is disabled, then there is a 41 game waiting period, after which the insurance company will pay 80% of the guaranteed portion of the player's base salary. Once a player is covered, the carrier can't exclude the player for the remainder of his current contract.
If the player is traded, his new team receives the beneft -- for example, even though Cuttino Mobley's heart condition was discovered prior to his trade to the Knicks, the Knicks received the insurance payout.
