If a homeowner doesn’t buy homeowner’s insurance, he or she must be risk-loving.
If a person is willing to pay a maximum of $750 to insure against a loss of $28,000 that will occur with 2.5% probability, then he or she is risk-averse.
Given the choice, a risk-averse person would be more willing to toss a coin twice and receive $1 each time tails comes up than to a coin once and receive $2 if tails come up.