That is exactly what it is.

Insurance is not some mumbo jumbo legal definition. Insurance is an individuals cost-benefit analysis of their situation.

Lets say I have made 100x on my BTC. Moving say 10% of my stash to a custodian protects a portion of my wealth from an attack / mishap with my own seed phrase storage. If the custodian goes bust, meh. I still got my 90% of the best performing asset.

And it helps me sleep better, so less stress, and so less likely to fumble the seed phrase...