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Michael Shackleford: Hi guys, this is Mike and the purpose of today's Wizard of Odds Academy lesson will be to explain why you should never take insurance in Blackjack. What insurance is, is a side bet that the dealer has a 10 point card in the hole.

It is offered when the dealer already has an ace up, so it wins in the event that the dealer gets a blackjack. The insurance bet can be made for up to half of the player's original bet and it pays two to one if it wins.

I'm going to…

Insurance comes into play in blackjack when the dealer has an ace as their up card. Insurance can be purchased for a price of half the original bet and will be deemed a side bet. This gives you the chance to win a 2:1 payout if the dealer goes on to hit blackjack. Why should you never take insurance in blackjack In his classification there is only one B-Game hand - and I'll not step on his punch line by telling what it is.At the time, Adelson and his why should you never take insurance in blackjack top congressional allies lambasted the decision. The main reason blackjack insurance is offered is that many players take insurance. Almost 100% of the time, this is a mistake. Insurance in blackjack is a sucker bet–you should never take it. A few exceptions to that rule exist. One gambling expert wrote “insurance is for cars and card counters”.

…put a two for the pace if the dealer has a 10 point card in the hole and a negative one if the dealer has an ace and a nine which represents that the player lost his insurance bet.

Let's assume six packs of cards, shall we?

Assuming no other information other than the ace up the dealer already has, there are 96 winning cards for the insurance bet, 16 times 6 out of 311 left. There's 311 because a full six-deck shoe is 312 cards and we take one out because of the dealer's ace, and there are 215 cards that will cause the insurance bet to lose.

Let's take the product of the win and the probability.

2 times 96 over 311 is 61.74% and 215 divided by 311 times -1 is -69.13%. In other words, the player can expect to win 61.74% of his bet and lose 69.13% of his bet. We take the sum which is -7.40%. That means that for every dollar the player bets on insurance, he can expect to lose 7.4 cents or 7.4% of whatever his insurance bet is.

7.4% is a pretty high house advantage and consequently, I recommend that you say no to insurance every time. Before someone says in the comments, 'Mike, what if the count is good? What if I'm counting cards?'

Yes. Then, of course, there are exceptions. If you've been counting cards and you know that the remaining cards are very 10 rich, but for the recreational player that's not counting, insurance is a terrible bet and, again, I recommend you decline it every time.

'What about even money?'

You might be asking me. Well, let me explain to you first of all, that the even money offer is the same thing as taking insurance. It's only offered when the player already has a blackjack and the dealer has an ace up.

Let's look…

…at what would happen both ways if the player has a blackjack and takes insurance. If the dealer ends up getting that blackjack, the main bet will push, so it wins nothing, but the insurance but will win one unit because the player bets half a unit on insurance. The insurance but pays two to one on the winning blackjack. One-half times two equals one.

Next…

If the dealer does not get that blackjack, the player's main wager will pay one and a half but he will lose half a unit on the insurance. The combined when between the main wager and the insurance wager is one unit when the dealer does get a blackjack and one unit when the dealer does not get a blackjack.

It doesn't make any difference whether or not the dealer gets a blackjack. If the player has a blackjack and takes insurance, he wins one unit either way and what the dealer is essentially saying is, 'Look, if you take insurance, you're going to win one to one regardless if I have a blackjack. I may as well just pay you now before I even check what I have.”

It sounds attractive but let's do some math and see if you should take it. Let's evaluate the situation where the player has a blackjack, the dealer has an ace up and the player declines insurance. If the dealer has a 10 in the hole, then the player will win nothing because it will be a blackjack against blackjack tie, in other words, a push. If the dealer has anything else in the hole, the player will win his full three to two on his wager or 1.5.

Let's assume:

knowledge of no other cards in the shoe other than what's already on the table. There are 309 cards left out of the 312 card shoe, less than three cards already involved, the player's ace and 10 and the dealers ace.

The probability that the dealer has a 10 in the hole is 95 divided by 309. Like I just said, there's 309 cards left, the shoe started with 96 tens but the player has one of them. The chances that the dealer has an ace to 9 in the hole is 214 divided by 309.

Let's examine what the player can get back either way:

If the dealer does have that 10 in the hole, the player can expect to get back nothing because the probability of zero times anything is zero. If the dealer does not have a 10 in the hole, the player can expect to get back 1.5 with a probability of 214 divided by 309. The product of those two numbers is 103.88%. If we add them up, it's obvious you still get that same 103.88%.

What this means is…

…if the player has a blackjack, the dealer has an ace up, the player can expect to win 1.0388 times his bet or about 104% of whatever he bet. The decision to whether or not to take even money is the decision; do you want to get back an average of 103.88% of your bet or just 100%?What's more? 100% or 103.88%? Well, 103.88% is more, therefore, if you're seeking the greater expected value, which you should be in any casino game, you should decline even money and go for that 103.88%.

Few caveats here:

Number one - again this is assuming the player is not counting cards, just a recreational player. Number two - this is assuming that a blackjack pays three to two.

Finally, this question has come up on my forum every once in a while and a lot of people use the argument that yes, I make a good mathematical argument for declining an insurance even money but what about the psychological argument?

If you’re in this situation with a blackjack against the dealer ace, some people will say you have a 100% chance of being happy by taking the even money, locking in a sure win but only a 69.26% chance of being happy by declining the even money.

Those figures are right but…

…in the casino as well as real life, you should be long-term minded. You should be thinking what is the expected average gain for any decision that you make? Do not always play conservatively and lock in the small win when the average win by taking a chance is greater.

Of course, there are exceptions for life-changing situations but if you’re playing Blackjack, it assumes that you like gambling, to begin with. You’re in the casino you’re gambling, gamble on winning that full one and half, don’t settle on the measly one unit. Furthermore, even if you do use this argument of I want a 100% chance of being happy right now, I’ll take the even money. That happiness is only going to last less than a minute until the next hand.

I think…

…you should be thinking what is going to be your happiness when you finally walk away from the table and you go home for your trip? The more money you win or the less money you lose from that sitting and the whole trip, the happier you’re going to be.

Furthermore, you’re going to get more, shall we say, action by taking that chance on winning with your blackjack. Like I said you’re gambling, to begin with, so gamble!

I can’t think of anything else to say on this topic. I hope that I’ve convinced you to always say no to insurance and even money.

Thanks, guys for listening and I’ll see you in the next video.

Use the Rubik Cube solver program to calculate the solution for your unsolved Rubik's Cube.

Insurance – By the Numbers

I was playing blackjack with a friend of mine, Phil.My bet was $100 and his was $150.I was dealt a 20 and he had a 19.

The dealer’s upcard was an Ace and we were offered insurance.I shook my head 'no' and Phil accepted the bet.He looked at me funny and said, “I want to talk to you about this later.”

Later we took a break in the casino lounge.Phil mentioned the insurance bet.

“I thought that you would want to insure a $100 bet, Martin.At least that is my understanding of the purpose of insurance.”

“No, I didn’t want to insure my bet.Insurance is only a good bet if you count cards and the deck favors the bet.Since I don’t count cards any more, I never take insurance.”

“But, as I recall, you had a 19 or a 20.Doesn’t it make sense to insure a good hand?And, when you consider that you had a large bet out with a good hand, it seems to me that insurance is the way to go.”

He was very adamant.Before I tell you how I responded, let me tell you a little bit about the insurance bet in blackjack.

Insurance is a side bet offered by most casinos.As with all side bets, it is a bet that heavily favors the house.

It’s strictly a bet for novices and the faint of heart.

And, for a few card counters, it occasionally makes sense.

Experienced players know not to take insurance.I turned the tables on Phil and asked him why he took it.

“I just think it makes sense to insure a large bet.And, it especially makes sense to insure a good hand like a 19 or 20.I still don’t understand why you don’t take insurance.”

Here’s what I explained to Phil -

Insurance is simply a side bet on whether the dealer has a 10 as a hole card when she is showing an Ace up.If she does, the bet pays 2 to 1.It is only offered when the dealer shows an ace.

Here’s how it works.The casino allows you to bet up to one half of your original wager.To insure a $100 bet, for instance, you would make a wager up to $50 as the insurance bet.If the dealer has a 10, and therefore a blackjack, you win the insurance bet, but lose your regular bet.The net is a break-even.It is called “insurance” because most players think of it as a way of insuring that you don’t lose money on a good hand or when your bet is large.I have commonly heard players say, “I only insure a 19 or 20.”

As with much blackjack wisdom, this is totally wrong.Whether insurance is a good bet or a bad bet has nothing to do with the value of your hand or the size of your bet.It makes just as much sense to insure a 14 as it does a 20.

Whether you win or lose depends on the dealer’s hole card. It has nothing to do with your hand.

Think about how the game goes when you take insurance.If the dealer doesn’t have a 10, you lose the bet and the game goes on, just the same as if you hadn’t taken insurance.If
she has a 10, she turns over her hole card, revealing her blackjack, and pays your insurance bet.In either case, your taking or not taking insurance has zero influence on the basic game.Your hand pays out the same whether or not you took insurance.

Phil was starting to nod.But I could see that I hadn’t convinced him.

“I still don’t see why, even if insurance is a side bet, that it doesn’t make sense to insure a good hand.Please explain.”

I continued.It helps to think of the insurance bet like homeowners insurance.Having homeowners insurance doesn’t keep your house from burning down any more than health
insurance keeps you healthy or life insurance keeps you alive. It just pays you (or your beneficiary if the worst happens).We know from strictly a statistical perspective that insurance is a bad bet. If it wasn’t, then insurance companies couldn’t build all those skyscrapers in Connecticut and Omaha and buy all those politicians in Washington D.C.

With most insurance we pay an affordable premium to avoid an unaffordable loss.This is where blackjack differs from other insurance.If your initial bet is an unaffordable loss, you have a bigger problem than worrying about taking insurance.

There is a psychological factor to consider.It feels worse to have a good hand beaten by a dealer’s blackjack than a poor hand.But this is strictly psychological.It really makes no difference to your net winnings.In fact, taking insurance will reduce your net winnings.And, I would argue that net winnings or net profits are the main consideration in every blackjack decision.

Phil was frowning at me“That’s all fine, Martin, but you still haven’t told me why taking insurance is a bad bet.It seems to me that if I want to insure my good hands, that it should be up to me.”

“Okay Phil,” I responded.“Let’s do some numbers.”

Let’s start with the fact that the insurance bet is nothing more than a side bet that the dealer has a 10 in the hole.

With a full deck of cards, four out of every 13 cards are 10-valued cards, cards which could make the dealer’s blackjack when an Ace is up.

Let’s say you bet $10 on insurance every time she showed an Ace.If you did this 13 times, on the average you would win four of the bets and lose the other nine wagers.Your nine
losing bets would cost you $90.Your four winning bets, paying 2 to 1, would bring in $80 for a net loss of $10.

This is a net gain for the house of $10, or 7.7 percent.

Now let’s consider what this might do to your hourly winnings.The opportunity to make an insurance bet occurs on the average once every 13 hands.At 80 hands an hour, this happens about six times an hour.Taking a $10 insurance bet every time it is offered will cost about $4.60 an hour.The player who only insures 19s and 20s will make about one insurance bet an hour.This gets the cost down to 77 cents per hour.

“Is that warm and fuzzy feeling you get insuring your 19 or 20 worth 77 cents an hour to you?” I asked Phil.

He stared at me and said, “I’ll have to think about it.But what about insuring a blackjack?Don’t you agree that this is a good move?”

In shared my thoughts with Phil.Insuring a blackjack is the same as taking even money for a blackjack.The same analysis applies to this bet that applied to insuring other hands.In all cases, it is a bad bet.

Phil lamely countered.“But card counters sometimes take insurance.Don’t they know what they are doing?”

I explained that sometimes, when the number of 10s remaining to be dealt is heavy, it may tilt the insurance bet in the player’s favor.

Here’s an example.Suppose the card counter’s count shows the deck is heavy in 10s.Furthermore, suppose that the calculation of tens remaining showed there were five tens
out of every 13 cards remaining to be dealt.In this case, if I took a $10 insurance bet at every opportunity, I would lose eight of my 13 bets for a loss of $80.However, I would win, on the average, five of the bets, which paid at 2 to 1 would pay me $100 for a net gain of $20.

Of course, you will first have to learn to count cards to benefit from this information, and then you will have to learn how to make lightning fast mental calculations to know when to take insurance Then you will have to find a situation where card counting can give you an edge.Sadly, with multiple decks that are only dealt part way (the rule in most casinos) and the use of continuous shuffling machines, card counting opportunities are very limited. Also, with online blackjack games, which are continuously shuffled, there are virtually no opportunities to count cards and ever profit from taking the insurance bet.

Phil kind of scrunched down in his chair.“You are basically telling me that insurance is a sucker’s bet, aren’t you.”

“You got it Phil.Now let me buy the next round.Then let’s go play some more blackjack without taking insurance.”

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When To Take Insurance Blackjack

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