My best guess is that most insurance is bought not to reduce risk but instead to signal prudence and caring. The first life insurance companies had a terrible time selling "bets on their death," and only succeded when they framed insurance as what a caring and prudent husband and father did to take care of his family. While simple adverse-selection theories predict that high risk folks buy the most insurance, in fact low risk folks buy more insurance. And we don’t want to insure our big life risks because such a desire would signal a lack of confidence in our prospects.
Actually I always saw life insurance advertised as protection for the insured. Yet, of course, its protection for the survivors.
My assumption, however, was that people were using insurance as a talisman. I.E., if I would actually benefit financially from my spouse’s death than surely it won’t happen, because nothing ever happens to benefit me financially.
Sadly, I think most hedging is based on this principle.