Quite honestly, while I am not thrilled with
DCL insurance (coverage is too weak, in my opinion, for the cost), there are many less expensive insurers, with better coverage. In my opinion, it's just too big a risk to take not to travel with insurance. Surprisingly, not because of this situation. While heartbreaking, it's not likely to result in long-term financial destruction, as you say.
However, if a medical emergency occurred on board the ship, and you did not have medical insurance that would cover it, you could wind up wishing you were only on the hook for the cruise, airfare and pre-cruise stay.
Still, I am very sorry that this family is in this situation. It is not fun to have your vacation ruined. It's definitely a good idea to purchase the insurance, IMHO.