When people first learn to play blackjack and are taught the basics, they are usually not taught about insurance. Not all casinos offer insurance. For those that do, when the dealer’s upcard is an ace, they will offer the players insurance. That is because, by showing an ace, they have a good chance of having a blackjack, which would be achieved with an ace and any card with a value of ten. Before the dealer checks his hole card to see if he has a blackjack, he may offer you insurance against the blackjack, which he does out of the kindness of his heart.
Just kidding. He does so to make more money for the house. For this example, I’ll talk about insurance where your original bet is $10. Insurance pays 2 to 1. Since insurance costs half of your original bet, you would pay $5 for insurance in the hopes of not losing all $10. If you and the dealer both have blackjacks, you win $10 (2 to 1 payout) on the insurance and tie on your original bet. Therefore, it is a net gain of $10. If you have a blackjack and the dealer does not, you lose $5 on insurance and win $15 on your original bet, which is a net gain of $10. If the dealer has a blackjack and you don’t, you win $10 on insurance and lose your original $10 bet. The result is a push. If neither you nor the dealer has a blackjack and you win the hand, you lose the $5 insurance bet but win $10 on your original bet, which is a net gain of $5. If neither you nor the dealer has a blackjack and you lose the hand, you lose the $5 insurance and your $10 original bet, which is a net loss of $15. Lastly, if neither you nor the dealer has a blackjack and you tie the hand, you lose $5 on insurance and tie the original bet, for a $5 net loss.
All of this may make insurance sound like a good deal. After all, you have more ways of coming out ahead than losing. Besides, without taking insurance, a dealer blackjack means you either lose or push. Be that as it may, insurance is a sucker’s bet. Since a 10 and all face cards have a value of 10, there is a better chance that the hole card has a value of 10 than any other value. But that is where people get tricked. Yes, the hole card has a better chance of being a 10 than a 7, 5, 2, or 9 for example, but it does not have a better chance of being a 10 than of being anywhere in the range of 1 through 9.
Boiled down to its simplest point, taking insurance is betting half of your original wager that the dealer’s hole card has a value of 10. There are 13 different cards in a deck and 4 of them have a value of 10. That means that there are 9 to 4 odds against that hole card having a value of 10. That ratio doesn’t change no matter how many decks are in play. Therefore, the only time it would be good strategy to take insurance on a blackjack is if you are counting cards and have determined enough 10-value cards are remaining that the odds are in the favor of the dealer having a 10-value hole card.
Unless you’re counting cards and are confident that the hold card has a value of 10, you should decline insurance. The house edge of playing out your hand is lower than on the insurance bet.