Take insurance? Bah, humbug!

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Life is full of sucker bets. The biggest one of them all is probably life insurance. After all, in order to come out ahead on the deal, you have to die earlier!

All kidding aside, insurance can be thought of as one of the bigger sucker bets – in the casino. Of course, casinos are full of sucker bets, but they’re not all constructed the same way. Let’s take a closer look.

I’ve frequently cited sidebets as having relatively low paybacks. It is not uncommon for them to have paybacks in the 85-95% range compared to a base game payback of 98%-plus. One of the reasons for this is players are more willing to trade off a lower payback for a significant victory.

The ultimate example of this is the lottery, which frequently has a payback of at most 70%. A significant portion of that, sometimes as much as 20-30% is the top prize. So, if you’re not one of the top winners, you’re playing a game in the 40-50% range or worse. But, when Powerball gets up to the hundreds of millions, the frenzy begins. We’re willing to play a game with an absolutely lousy payback for the once in a lifetime chance to win a super sized jackpot.

Most sidebets don’t pay that big. Well, none of them pay like Powerball. But, some progressives can pay a few million dollars. This is enough to sway many people to play a game with a payback in the 80-90% range. Then we have more routine sidebets with top payouts that are in the 100’s to 1, maybe 1,000 to 1 range. Players typically want to see paybacks of minimally 85-90% to find these worth playing. Most sidebets are generally in the low 90’s. The ones that use multi-deck shoes and are prone to counting tend to be in the mid 80’s.

We could debate whether all of these wagers are sucker bets as well. The paybacks are low, but they do have the potential for significant wins. So, I’m willing to consider putting these into a gray area.

Those I definitely put in are those that don’t have this one benefit. The payouts are simply not all that high and the paybacks are relatively low. We can find a lot of these on a craps table. The base wager of craps and many of the options have reasonable paybacks. But some of the prop wagers have so-so paybacks and so-so payouts.

That brings me to the insurance wager in blackjack. For those not familiar, the insurance wager is offered to the player only when the dealer has an Ace upcard. At that point, the player may make a wager equal to half of his base BJ wager. It will pay 2 to 1 if the dealer has blackjack. It is an ingenious construct. The amount you will win is identical to the amount of your base wager, which you will lose if the dealer does have blackjack – unless you have one, too. Hence, why it is called insurance. If you make the wager and win, you get to keep your base wager. Of course, if you don’t, you lose the insurance wager and are still facing an Ace.

The construct is not the issue with this wager. It merely may be one reason it has survived this long. The issue is the payback leaves a lot to be desired. With the dealer having an Ace up in a six-deck game, there are 411 remaining cards and 96 of them will result in a blackjack. This is 30.87% of the time.

This will be impacted somewhat by the cards in the player’s hand. If the player doesn’t have a 10/Face, the odds go up. If he does, the odds go down. But using this as the probability and considering a 2 to 1 payout, we find the wager has a payback of 92.60%. Further, the payout is a mere 2 to 1, so you’re not about to get rich off this wager. In fact, quite the opposite. You start with a 99.5% payback blackjack game and in just over 7% of the hands you’ll make a wager that pays only 92.6%. It is hard enough to win at blackjack, but do you really need to make a wager with a low payout and a low payback?

This past week, I was involved in a conversation in which the main topic was how many people actually make this wager nowadays. No one had any scientific information to help us arrive at an answer. My own experience is that few people do anymore. The last few times I played blackjack, I don’t recall anyone making it except maybe when they had blackjack. This is called taking “even money.”

Whether the dealer has blackjack or not, the net result is the player will win even money on his base blackjack wager instead of the usual 3 to 2 (or 6 to 5 in many casinos). Unfortunately, the same math applies. Psychologically, you don’t want to wind up with a push when you have a blackjack, so you’ll “settle” for even money.

The reality is you are just settling. You’d be better off in the long run taking your chances and going for the full payout.

About the Author

Elliot Frome

Elliot Frome’s roots run deep into gaming theory and analysis. His father, Lenny, was a pioneer in developing video poker strategy in the 1980s and is credited with raising its popularity to dizzying heights. Elliot is a second generation gaming author and analyst with nearly 20 years of programming experience.

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