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Insurance Contract (Poker)
Insurance in a poker game is a relatively new phenomenon. It is a bet (side bet) between two players, or between one player and an outsider against a particular hand losing. The insurance or agreement is taken out before the last of the cards are dealt and usually where the hand can go either way.
For example, in a standard game of Hold'em, one player is all in on fourth street (the turn card) for his entire bankroll. If he loses, he is finished and out of the game. He has cowboys, and has already hit his set on the flop. There are flush possibilities on the board and his opponent calls the bet and flips up two spades, making him four to the flush.
Any flush that doesn't pair the board (which has an ace) and the three kings are history. This is a typical situation where the player with the set might take out insurance, in essence a side agreement with another player or outsider to the game. The way it works is that the player with the set would take out a contract for insurance so that should he loose the hand, the person with whom he places the side bet would cover some or all of the loss. Should the player with the set win the hand, he would pay out the same amount that he would have won, had his hand held up (all based on the odds against his losing), would allow him to still make a profit.
Generally speaking, the more desperate the seller of the agreement, the worse the terms that he will receive which is why you will often see deals being brokered based on the odds of winning.
Tournament Insurance (Bubble)
This is also very recent and involves a player taking out insurance in the event that they bust out of the tournament on the bubble, or within X number of places of the bubble. This has been done in the WSOP, there insurance has been offered to players that bust out within 5 or 6 of the bubble - these players are offered free entry to the following years WSOP.
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