Perhaps for the American case of buying a few dozen martinis, but what about the anecdote of a Japanese man taking 200 guests on a dinner cruise? With a premium of $3, per the article, that might not be a bad idea.

The article gives a "typical cost" of $3-5000 for a Japanese person keen to show their generosity. It doesn't make it clear the policy will pay out anywhere near that much (the British policy we are given a direct link to covers a lot more than holes in one, but pays a maximum of £200 on alcohol only for holes-in-one, at an overall premium cost of £49.95 per annum)

Even if the $3 premium really is a one off fee which covers $3000 worth of celebratory cruises (both of which I doubt), an amateur golfer with a 1 in 12,500 chance of getting a hole in one and enough disposable income to join the sort of golf club that expects celebratory cruises probably shouldn't bother.

My understanding of the article, in the Japanese case, is not that the club requires or expects this sort of thing. This is a cruise for the "lucky" golfers friends and family and is more a societal expectation for whatever reason.

Just because you play golf, does not mean you wouldn't miss several hundred dollars. Golf is not really a poor man's sport, but neither is it polo.

I can't shake this image of someone holding a $5 Starbucks in one hand, paying a $3 insurance premium to cover a less than 1 in 10K chance of losing $500 and complaining that they can't "afford to risk the $500".

Let's see: you just paid $3 to hedge a risk with less than a nickel's worth of -EV and you're holding your daily Starbucks. I'm beginning to understand why you can't afford the risk...

Yes, yes. I know I'd be erecting a strawman if the coffee was central to my argument. I don't think it is; I'm just trying to share my mental frame.

Ah, but this is why insurance works- if you don't have a spare $500, the pain of a $500 payout is greater than $500. That's why, even though the liability multiplied by the probability is less than the premium, it can still make sense.

Do you have car and home insurance? All insurance has negative average payout.

Since you asked:

I have liability-only car insurance (and high limits at that) but not collision/comprehensive, as I can readily write a check for a replacement car. (My car is worth about $5K; my wife's car about $7K.)

I have home insurance as I'm required by my mortgage to have it, but also because losing the house would be lifestyle-changing.

I don't insure risks that wouldn't be lifestyle-changing (unless legally mandated). I'd wager that $650 for a round of drinks isn't lifestyle changing for most golfers.

This insurance makes extended warranty plans for electronics a positively great deal in comparison...

I suspect that it more a social than a financial issue. Maybe getting that insurance acts as some sort of status signal, showing commitment towards honoring the tradition even if the occasion will most likely never arise.

hole in one insurance is usually just charged by the club in addition to membership fee, not by an actual insurance company. its also inaccurate to assume that anyone who plays golf can afford $500+ in alcohol.

> its also inaccurate to assume that anyone who plays golf can afford $500+ in alcohol.

One would hope then that upon getting a hole in one they would not spend $500 that they cannot afford. It's not a requirement to buy anyone else a drink.

Its probably club policy - when you become a member you sign a contract agreeing to whatever it costs to be a member, plus either hole in one insurance or the promise to purchase drinks for everyone there that day.

That part of why the insurance is unusual - It's basically insurance against a specific kind of social embarrassment.