Not to keep going to the same well, but that NCAA FAQ link I posted upthread sheds a little bit of light on the question.
How does loss-of-value coverage work?
Insurance underwriters will first determine an athlete’s eligibility based on their draft position. If they are projected to be selected early in the draft, underwriters could offer coverage limit that typically falls between $1 million and $10 million, based on the projected draft position. The underwriters will then set a loss-of-value threshold that is typically 50 to 60 percent of the athlete’s projected rookie contract. If the contract an athlete signs falls below that threshold as a direct result of an injury or illness suffered during the coverage period, the insurance would pay them the difference between the actual contract’s value and the policy’s predetermined value.
It also recommends that only athletes projected to go in the top 10 of the draft get loss of value insurance.
Who should purchase loss-of-value coverage?
If an athlete chooses to purchase LoV coverage, the NCAA recommends they only do so if they are projected to be selected among the top 10 picks in their respective draft. Athletes projected to be selected outside of that range may have challenges proving their projected value when they file a claim.
What factors can affect a payout?
It’s important to understand that simply suffering an injury or illness and then being selected with a later draft pick than anticipated does not guarantee a claim will be paid. Proving an injury or illness was the sole and direct reason for the decrease in value can be difficult, and many factors can be used to void a claim. In fact, policies include standard exclusions for pre-existing injuries or illnesses, osteoarthritis or degenerative conditions, drug and alcohol use, criminal acts and mental, nervous or psychological disorders. But other factors that can adversely affect a claim include: off-field issues; poor performance during the season; poor performance at pre-draft events; a rise in the draft value of other athletes due to superior performances; changes in professional teams’ needs.
http://www.ncaa.org/about/resources/insurance/loss-value-faqs