Blackjack Insurance
If the dealer’s upcard is an ace, the player is offered the option of taking Insurance before the dealer checks her ‘hole card’.
Insurance is a side bet of up to half the original bet placed on a special portion of the table usually marked “Insurance Pays 2 to 1″. The idea is that if the dealer has a blackjack, i.e., a ten-value card as her hole card, then the player is usually going to suffer the loss of his original bet. By making an extra bet of half his original bet on “insurance,” which pays 2-to-1 if the dealer has a blackjack, the “insurance proceeds” will supposedly make up for any loss on the original bet. Of course the insurance bet is forfeited if the dealer does not have blackjack, although the player can still win or lose on the original bet.
Insurance is a poor bet for the player unless he is counting cards, because the casino has a theoretical house advantage of 7.69% (“infinite deck”). The theoretical house advantage is easy to calculate, since the player is essentially betting that the dealer’s hole card is a ten-value card. To calculate it, we can use the example of a player with an original bet of $20, the dealer has an ace, and the player takes insurance for $10. In an infinite deck, 4/13 of the cards are “tens” (10, J, Q, or K). In theory, the insurance bet will lose 9/13 of the time for minus $90 and will win 4/13 of the time for plus $80, giving a net loss of $10 for 13 hands. The average loss is $0.77 per hand ($10/13), or 7.69%. Therefore, taking insurance is a poor bet for the player (unless he is counting cards).
The odds on the Insurance bet are not improved if the player has a blackjack — it’s still a poor bet. Insurance is simply a side-bet that the dealer has a ten-value hole card, regardless of the player’s original cards. We can use the same example, where the player has a blackjack on his original bet of $20, the dealer has an ace, and the player takes insurance for $10. The two bets are completely separate. The player can expect on average to win $20.77 for his blackjack, since the original bet wins 9/13 of the time for a total of $270 (9 x $30) and ties 4/13 of the time for a gain of zero, for an average gain of $20.77 per hand ($270/13). Meanwhile, the insurance side bet of $10 is calculated separately and loses $0.77 on average. Therefore, on average, the player would win $20.77 for his blackjack on his original bet, and would lose $0.77 on the $10 insurance bet, if he takes insurance. The insurance bet is still not worthwhile (unless, again, the player is counting cards).
A variation on this is that some casinos or dealers may offer the player what they call “even money” by offering to pay out the blackjack at 1:1 when the upcard is an ace. This is exactly the same as taking insurance, although the player does not have to put up the insurance bet. Again, the player’s expectation for the “even money” option is $20.00, instead of an average of $20.77, so it’s not a favourable bet (unless the player is counting cards).
In casinos where a hole card is dealt, a dealer who is showing a card with a value of Ace or 10 may slide the corner of her hole card over a small mirror or electronic sensor on the tabletop in order to check whether she has a blackjack. This practice minimizes the risk of inadvertently revealing the hole card, which may give the sharp-eyed player a considerable advantage.
Even though insurance is a bad bet in the long run, many players still take it, especially when they have blackjack. A BIRD in the hand is worth two in the bush. Not taking insurance pays in the long run but in the short term some players prefer it.