A person is insane to the degree that he acts insanely, to the degree that he believes in things flatly contradicted by the evidence.
By evidence, I mean the highest quality evidence, scientific evidence, but also any lower quality body of evidence that at least coheres.
For example, a person who believes firmly in intelligent design is acting insanely. First off, what intelligent designer would design a plurality of species, 99% of which have already gone extinct? Answer: no one- intelligent design is not credible. In addition, ask any group of biologists, including by way of example, etymologists, zoologists, anatomists, physiologists, and botanists, and they will give you a dozen examples off the top of their heads that flat-out contradict intelligent design.
Another example: an American who believes he is Jesus or Napoleon – clearly there is a body of evidence that coheres that says these beliefs are not true.
By this definition of insanity, the majority of people may actually act so insanely as to be judged to be insane. However, this is not an argument against the definition. It merely means that the normal distribution of “sanity” has a mean that would more properly be termed “insanity.” Our linguistic usages reflect an insanely innate optimism, including our false beliefs in our basic sanity. As a whole, we are mad, insane, ignorant, vain, and stupid. We defend the indefensible.