Have you ever been involved in a big cash game pot and wondered if there was anything you could do about the variance of the spot?
While the normal poker rules don’t offer any solutions, poker players have come up with quite a few ways to battle variance in key spots, with poker insurance being one of them.
Poker insurance is a gentleman’s deal done between players, and usually something we see in higher-stakes games.
On this page, we will take a deeper look at insurance in poker, explain how it works and when it makes sense, and explore some poker insurance alternatives such as running it twice and early cashout.
What is Insurance In Poker?
Poker insurance is a deal between poker players, which allows the players to insure their equity in a pot when all the chips go in.
Insurance only exists in cash game poker, where the chips have a clear monetary value, which allows players to quickly figure out the insurance value and make a deal.
It is important to say that poker insurance is not a part of the basic rules of poker, but rather a side deal that can be made away from the table.
Players usually seek insurance from other players in the game, and the house may offer insurance to the players in some rare cases as well.
The way insurance deals work is that the parties involved first figure out the equity of each player’s hand and compare it to the size of the pot.
Once the expected value (cEV) of the hands is determined, the parties can begin to negotiate the premium, as the person giving insurance usually wants to be given a slight edge in exchange for providing the service.
With insurance, you may be able to guarantee a profit in the biggest pot of the night, but you are also guaranteed to lose some of the potential value of winning the pot outright.
Poker insurance is the perfect way to reduce variance in poker cash games and realize a good chunk of your equity in key spots without taking the full risk that comes from big pots in deep-stacked cash games.
Poker Insurance In Action
Now that we’ve explained how insurance in poker works on a basic level, let’s take a deeper look by dissecting an example.
Imagine you are playing in a $2/$5 private cash game, and the following scenario comes up:
- You are all-in with one other player
- The pot is exactly $1,000
- You have 80% equity in the hand
- Another player offers you insurance
In this situation, the value of your equity in the hand is 80% of the pot, or exactly $800. If the person offering insurance is your close friend, they may offer you a deal with no premium, meaning you get to realize your full equity.
The way it works is that, if you win the $1,000 pot, you pay the person $200. If you lose the pot, the person pays you $800 out of their pocket.
This way, the insurer is risking $800 of his own money, which he will pay one out of five times, for the $200, which he will receive four of five times. In the long run, they will break even by giving you insurance like this.
In most real-world scenarios, insurance is given with a premium. In this same scenario, the insurer may offer $750 to your $250.
That means you would need to pay $250 when you win the pot, and would receive $750 when you lose the pot.
Since you will win the pot four times and lose it once, you are paying $1,000 to receive $750 in insurance, for a total of -$250 per five hands, or -$50 per hand.
The $50 in this case is the cost of doing business. The insurance premium you are paying gives you peace of mind and allows you to realize most of your equity, but it also costs you real cash in the long run.
Is Poker Insurance a Good Deal?
If you have watched poker shows like High Stakes Poker and Poker After Dark over the years, you may have seen the likes of Phil Hellmuth seek insurance in pots they perceived as big.
The truth is that, unless your insurer is offering you a deal with no premium for some reason, insurance is never a good deal in poker.
Since poker insurance always comes with a premium you must pay, the real value of the deal is always negative in a financial sense. The only reason it ever makes sense is your peace of mind and bankroll protection.
Some in the poker world would argue you should never play in games where you need to ask for insurance in the big pots, as it probably means your bankroll is not large enough to afford playing in the game.
Yet, others recommend taking liberal shots with your bankroll, in which case some insurance at the right time can make all the difference.
At the end of the day, poker insurance is never a good deal from a mathematical standpoint, but it can be the right financial decision when you find yourself in a spot you are not used to being in.
Poker Insurance Alternatives
As we mentioned before, there are some alternatives offered these days to the typical poker insurance in both live and online cash games.
Here is a look at a few traditional ways players have found to reduce variance in the games while getting around having to ask for insurance in real time.
Running it Twice (Or More)
The concept of running it twice has become very popular in live cash games and has recently been offered by many online poker sites as well.
The general idea is simple. Once the players are all-in, the remaining cards are dealt more than once, with each runout corresponding to a portion of the pot.
For example, in a $1,000 pot, the winner of each of the two boards wins exactly $500. If the board is run three times, then the winner of each wins $333.33.
The general idea is the same as with poker insurance, as running the board more than once reduces variance in spots where equities run close, and the pots get big.
Early Cashout
Online poker sites came up with an even smoother solution to poker insurance, offering a feature called early cashout in all-in situations.
Early cashout works similarly to traditional insurance, with the house taking on the role of the insurer. Both players can ensure their hands in online poker games when the chips go all-in.
In a $1,000 pot where you have 80% equity, the poker site will offer you a cashout worth $792, almost your entire equity. The extra 1% you don’t get paid is the premium charged by the operator for the service.
With early cashout, the hand ends for you as soon as you accept the cashout. The board will run out for your opponent’s sake, but you will never be able to win the whole pot.
Instead, you will receive exactly the amount you agree to cash out, and the house will automatically pay you that amount.
Early cashout is a very smooth solution to reducing poker variance, and it only costs you 1% of the pots you choose to take it in.
Poker Insurance Conclusion
Insurance in poker is a slightly outdated way to reduce variance, which has mostly been replaced by running it twice.
If you come across a game in which insurance is offered on your poker journey, remember to consider the proposition carefully and decide whether the premium being charged makes sense in a given situation.
For the most part, try avoiding poker insurance whenever you can, both because of the mathematical disadvantage it puts you at, and the other issues it may cause (not getting paid or other players paying with chips from their stacks).
