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This article examines the effect of public compensation programs on the insurance behavior of private forest owners. We analyze the impact of three types of public programs currently used in some European countries: flat-rate aid, contingent flat-rate aid, and insurance subsidy. We also analyze the impact of ambiguity concerning the probability of risk occurrence on insurance demand. We begin by formulating theoretical predictions about the effects of public programs and ambiguity on insurance demand. We then test these predictions on forest owners. The results of our experiment confirm our predictions. Flat-rate aid and insurance subsidies do indeed reduce forest owners’ insurance demand. Contingent flat-rate aid generates a smaller reduction in insurance demand than non-contingent flat-rate aid. Forest owners are also more willing to pay for insurance in an ambiguous context than in a risky one. This finding confirms our prediction that forest owners are ambiguity-averse.