[mcnees287]

It's just insurance. One side pays the other side if a certain outcome occurs. In exchange for protection from the outcome, the side seeking protection pays a fee.

[roywiggins]

It's more like buying insurance on someone else's house, when you know they are a meth lab and the insurer doesn't.

[sosborn]

In that case the insurer should do their due diligence before taking the bet.