There's no hedge against adverse circumstances in our lives.
Of course, no monetary amount can be exchanged for many of the things in life that are so critically important. But on a monetary exchange level, insurance transfers current money to possible future money at a time when we need it more, and when it could possibly make you feel a little better. For that, I am willing to pay.
When I buy insurance on cancer, it is almost like a 'basis risk' between my emotional/physiological state and my monetary state which is hedged.
What's my hedge ratio? I've never been through such a state yet to be able to estimate it. The hedge ratio is related to the gain in monetary amount that would help buffer emotional loss (at least to some degree). I'm not sure if it does, but I would think that if I do get in to such a state, there is a possibility that some income would make me feel just a little bit better.