[itsoktocry]

>When you insure your house, you don't usually wish for it to burn down.

You're leaving crucial information. You don't buy insurance (or puts) at any price. It has to make economic sense, and the person on the other side presumably has the same information.

[yreg]

Of course, being safer (more conservative) brings lower profits. I'm for sure not suggesting to be puts-insured all the time! It is just a useful instrument when one wants to hedge.

The person on the other side is likely a market maker selling both kinds of options. The price is dictated by market.