[vkou]

Insurance is gambling that reduces your risk, rather than increases your risk.

That's generally the reason for why it's treated differently, by law.

[webmaven]

> Insurance is gambling that reduces your risk, rather than increases your risk.

Aren't hedge funds (nominally) doing the same thing?

[vkou]

Yes, but hedge funds have a larger counterparty risk. Their hedge is more likely to not work out, than your insurance is to fail to pay up. (And this aspect of insurance is quite heavily regulated.)