Because you're not buying it to win money. You're buying it to limit downside loss, because aside from the massively wealthy, we are loss averse. It's worth our

Because you're not buying it to win money. You're buying it to limit downside loss, because aside from the massively wealthy, we are loss averse. It's worth our while to pay $200 to insure against a 1% chance of losing $10000, even though in purely probabilistic terms that's a bad deal, because most people can't afford an unexpected expense that large. Even people who can afford that, it's still more painful to lose it than to have a 99% chance of having wasted $100. The larger the potential downside, the bigger the incentive to insure against it, even when it's a bad deal.