If you have ever played blackjack, then you are probably more aware of the concept of insurance than the public. In blackjack, insurance is designed to play nothing but a supporting role in the game. But is it worth it? Well, just as much as it is not!
A side bet on the dealer having blackjack is known as insurance. It works independently from your main stake, just like any side wager. The option is only available if the dealer displays an ace after all of the initial cards have been dealt. You have to risk half your bet in order to take it.
The option to get insured pops up only if the dealer has an Ace. The fear generated by that scary, visible Ace makes you forget what you actually came there for – gambling. If the dealer has a blackjack, you don’t lose. If the dealer does not have one, the game continues (you have already lost the insurance) – and you still have a fair chance of losing your actual bet.
Insurance in blackjack – Comparison with insurance
The biggest loss with insurance overall is not the money you have lost on the insurance, but the fact that you are not aware of what you are really betting on. The insurance bet means that your original wager is a part of a combination bet. You can easily feel insecure about losing the insurance if you don’t know about the chance to lose your initial bet as well.
You can imagine this combination almost like a teaser – promoting one product with another as a bonus. So in our case, the hidden side is blackjack loss – it’s just not visible at first sight because of the excitement generated by an Ace appearing.
Another loss here is time. If you do not want to know what is going to happen, then why play blackjack? It’s a waste of time! For blackjack, you waste a minute or so. But in actual insurance puzzle: Spend 5 years to find out ‘whether you do not lose or don’t lose’. There is no option of winning. If you are playing blackjack mostly for the fun of it, then insurance is just another thing that doesn’t really mean anything.
Insurance is based on two things – how much does it cost and how much does it pay? The price of insurance and the payouts are all based on one thing – the dealer’s hand. If the dealer has a blackjack, then insurance pays 2:1. But you lose your actual bet, and it’s a “no-loss”, not a “win”.
Gambling is like that too. It’s just not quite so obvious. The bankroll of blackjack players is known as unique among gambling games – after playing for a long time, the bankroll can turn out to be bigger than at first sight. Optionally, it can grow to be a lot bigger than it was at first sight (positive expectation).
Comparing insurance and gambling
Insurance and gambling are comparable from a house-edge point of view. Both win due to the law of large numbers. But from a consumer’s point of view, the two terms are colossally different.
There are two types of gambling: obvious and unobvious. Obvious vs Unobvious is whether or not one knows that they have an disadvantage over the dealer. While you gamble, you know that most people lose, and you are going to lose as well.
But what happens when you don’t know that you have a disadvantage? That’s where insurance comes in! You get insurance based on the fact that you don’t know if the dealer has a blackjack or not.
A gambler’s strategy
You are not a gambler if you know that you have an advantage. It doesn’t matter whether you’re not playing blackjack in the casino or in your living room. The point is whether you know that you have an advantage over the game or not. The way to change this situation is to increase your edge until it’s bigger than the house edge of a game.
The House Edge (HE) is the key term for every gambler – it shows how much of a disadvantage the player will face over time compared to when he is playing against his own bankroll, i.e., with his money only and no extra risks, on any stake he chooses.
A gambler can not have any strategy, as long as he doesn’t know what HE is. Definition of any strategy without knowing the house edge, is just a waste of time.
In other words, as a gambler, the more you play, the more you lose.
A trader’s strategy
Now comes another group of people, a part we have not touched yet in this article. Traders – the people who believe that the future is almost unpredictable, not totally unpredictable. They know they can not win at blackjack – they can just be lucky. But they are pretty much sure that they will always win by day-trading in the long run, as trading is more about enhancing your own odds of win.
So one is not guessing, and not gambling. One is trading. That’s what you call a strategy, and it’s based on the house edge. The issue of whether you are a gambler or trader is irrelevant to the issue of what the house edge is.
And just like with gambling, there are two ways to go about it. Either you can try to reduce the house edge as much as possible or you can increase your own edge as much as possible.
Is insurance more trading or more gambling for a consumer?
Insurance is not related to trading by any means. Insurance is a small amount of gamble. When I say small amount, I mean that your gambling is all on one hand, while your insurance is all on the second hand (the dealer’s hand).
In other words, it’s a lot like a teaser. You strive to get the “free” or “no-loss” when you play blackjack, and you can receive the same treatment when you gamble. You try to make sure that you get the “wins” or even better than the dealer. It’s all about trying to win over an adversary – the game.
Gambling is more like exciting horse races with odds of losing in your favor. Insurance is like betting on ‘red’ and ‘black’ at the same time, knowing that there is a ‘0’, as well, on the roulette wheel.
This is what you can do instead!
This article was not a book of Trading. But it must have fed you with a more-than-decent overview of what trading is all about. The best thing you can do is get insured only for government-mandatory, or actually necessary things. Use the remainder of money you would use for extra insurance, for trading instead.
While it is true that 95% percent of the traders still lose, you have an option to not be part of that 95 percent by investing in yourself in the first place. Be a smart player, and you will be rich in no time!
Now you know what the house edge is, and how to utilize it. You can either try to reduce it or increase your own odds of win. Just like insurance in blackjack, there are more than one way to manage your real-life insurances. If you didn’t know that you have an edge (a disadvantage) over the dealer, then you know now! Analyze your strategy from now on and make sure that it fits into the house edge.
It is about enhancing your own chances of win, not about trying to reduce the odds against yourself.