Although compulsory insurance mitigates the negative externalities caused by uninsured individuals, it raises the issue of insurance crowding out prevention. However, at the theoretical level, compulsory insurance and self-insurance (preventive investments dedicated to loss reduction) are know to be substitutes for risk averters but complements for risk lovers. This paper aims to empirically test these opposite predictions through a laboratory experiment using a model-based design. Our experimental results confirm the theoretical predictions: compulsory insurance and self-insurance are complements for risk lovers and substitutes for risk averters. This study strongly supports public policies advocating mandatory insurance implementation as they enhance risk lovers’ self-insurance investments. Therefore, a risk management scheme combining voluntary top-up and compulsory partial insurance guarantees an optimal risk allocation for risk-averters and increases the investments in self-insurance for risk-lovers.