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Don't you doubt that an insurance company is going to shell out millions just because a team says a guy is injured? I do. There's gotta be something to the injury claim.
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You can buy insurance for anything you want--it's just a matter of money. I don't know anything about the way the NBA's insurance on injured players works, but it's very likely that no real injury is required (in the sense of an injury that would absolutely prevent a player from playing--almost all NBA players have injuries of some sort after a few years).
But the insurance company wouldn't issue the policies if they didn't make money at it.
So, yes, it is a wonderful world.