Is insurance a hedge?

In finance, holding a long position means you profit if a security you own goes up.  By contrast, holding a long position means you lose if the value of the security goes down.

Admittedly not exactly the same, but I like to generally use the long-position analogy to refer to your ability to earn an income, to the value of your tangible assets, and to the preservation of your net worth. You’re financially probably all good if your income rises, or your tangible assets remain intact, or your net worth isn’t attacked in a lawsuit.  So you hold “long” positions in those elements of your financial status (to be clear, those things are not securities and this is just an analogy).

If you no longer had the ability to bring home a paycheck, or you lost your tangible assets to an unfortunate event, or you owed someone money because of a lawsuit, that “long” position means you’ve just lost to an occurrence you didn’t prepare for.

Insurance works similar to any other financial product that aims to limit the impact of certain risks to your financial position.  It’s not a short because there’s no profiting from insurance, but it’s predictably able to reduce the consequence of loss on “long” positions.  My point is that the smartest consumers think of their insurance this way because it defines the scope of how they make their insurance-buying decisions.