According to ESPN.com's Darren Rovell, Butt started collecting on the policy when he wasn't taken by the middle of the third round Friday, and he enters the fourth round Saturday having earned $150,000 thus far.
Butt tore his ACL during the Orange Bowl against Florida State.
Butt had a productive collegiate career with the Wolverines, registering 46 receptions for 546 yards and four touchdowns as a senior.
That was good enough to net him the John Mackey Award as the nation's most outstanding tight end.
Butt was expected to enter the 2017 draft as one of the top tight end prospects; however, his injury has scared teams away.
Entering the fourth round, six tight ends had been selected, including three in the first round.
Butt's insurance policy is softening the blow, as is the fact he signed a fitting endorsement deal with the Charmin toilet paper company prior to the draft, per Mark Snyder of the Detroit Free Press.
Bleacher Report's Matt Miller listed Butt as the No. 2 tight end left on the board entering Day 3 and projected in his Day 3 mock that the tight end-needy New York Jets will select him at No. 125 overall in the fourth round.