The House Always Wins - Insurance Fraud

A popular question I get asked when people find out that I used to be a casino dealer is the truth of the popular belief that “you should never take insurance.” I thought I’d take today’s post to explain why – again, unless you’re an MIT genius with a photographic memory – that statement is 100 percent true.

For those unfamiliar with blackjack, most casinos offer something called insurance when the dealer has an Ace showing as their upcard. Before proceeding with the rest of the hand, and before checking to see if they have a blackjack, a dealer is supposed to stop and offer insurance to the table.

The better dealers will actually take the time to make an elaborate show of this with their hands in order for the cameras to record that they are indeed making the offer. In fact, if a dealer doesn’t make a visible gesture, many players will cause a stink if the dealer does indeed flip over a face card, claiming that the dealer did not make said offer and demand they get their original wager back. Very often, this tactic works, since the cameras record only video and not audio.

So what is insurance?

When the dealer is showing an ace, you can put up an additional wager, equal to no more than half of your original bet. If the dealer does have a blackjack, this new bet gets paid 2-to-1. Essentially, the way most people look at it – it’s a way to protect your original wager.

If a dealer has blackjack, unless you also have blackjack, you lose. So players with a “good hand” – say 20, or a double-down hand like 10 or 11 – will often put up the insurance bet. Players with a 14 or 15, on the other hand, expect their hand to lose anyway, so they let it go without risking more money.

Of course, thinking that way is backwards. Forget about what you have. It doesn’t matter. Either you believe the dealer has blackjack, or you don’t. That’s all this bet is – a side bet that the dealer DOES have a face card. And let’s re-examine those odds, shall we?

Assuming we don’t know any of the other cards that have gone before this hand, there are 16 chances out of 52 (four 10s, Js, Qs and Ks) of a face card appearing… or 4 out of 13: 31 percent. Without boring you with all the intricacies of the math involved, or adjusting for the cards already on the table, what this means is that at a 2:1 payout, over the long haul the house has essentially a seven-percent edge on this wager.

It’s a ripoff. Don’t take it.

Now, the odds change a bit if you have a blackjack yourself. Why? Because you won’t lose your original bet if the dealer has blackjack – it will be a push. However, if the dealer doesn’t have blackjack, you’ll get paid at 3-to-2 for your “ace and a face.”

Here the common rule of thumb you’ll hear players at the table rattle off is “Never pay for insurance… unless you have blackjack.” And again, they are wrong. Let’s break it down…

You have a $10 bet. You take $5 insurance.

1) Dealer has blackjack: You push on the hand and win $10 on insurance. Net: $10

2) Dealer doesn’t have blackjack: You get paid $15 on your blackjack and lose the insurance. Net: $10.

So is it worth it? If you take the insurance, you’re getting $10 regardless of what the dealer has.

If you don’t take insurance on your $10 bet?

1) Dealer has blackjack: You push on the hand. Net: $0.

2) Dealer doesn’t have blackjack: You get paid $15 on your blackjack. Net: $15.

And since the dealer should have a non-face card at a rate of 69 percent, and $15*0.69 = $10.35, over the long haul, you’re losing more than you win by putting up that insurance bet.

Obviously, if you knew, based on the actual number of face cards remaining in the deck that the odds of the dealer having one were greater than 1/3, it would be worth it to take insurance on a blackjack. But barring that, it’s just a way for the casino to grind your bank a little bit quicker than usual, while giving you the illusion of choice.

Over time, enough people became educated to these odds, and realized the folly of taking insurance – to the point where very few players were making the insurance bet at all, even with a blackjack. So the casinos got a little clever. Now, when a dealer has an Ace showing, they’ll offer insurance to the table, as usual… but if a player has a blackjack showing, they’ll ask them, “Even money?”

When the player asks what that means, a dealer is told to say, “If I have blackjack, you don’t get paid. If you take even money, you get paid even if I have a blackjack.”

That sounds a whole lot more enticing than, “If you want, you can put up more money on the table to protect your blackjack in case I have one” doesn’t it? And psychologically speaking, it works. Because most people take “even money” without blinking, even screaming for it before the dealer has chance to ask.

And that’s reason No. 296 that the house always wins…