> paying 3k per year, to avoid 1% risk of 250k losses may be a good idea

You are basically guaranteed to pay 3k to avoid financial risk with a mean value of 2,5k. That sounds like a fallacy to me (isn't it the same as saying that paying 3k for 1% chance of winning 250k is a good idea?), may make sense psychologically though.

That logic is reasonable if you can trivially afford 250k; in that case, you might choose to self-insure. However, that logic does not hold if the 1% event is not something you can afford.

Every dollar does not have the same incremental value. Going from $1B to $1B-$250k is not the same as going from $300k to $50k, and definitely not the same as going from $50k to -$200k.