In Vaudeville theater, "insurance" was the term used to refer to an act or material that was sure to go over well. This would have been important because it allowed room to take risks or experiment with other acts in the performance-- if one of these was not well received by the audience, the insurance piece could improve the overall opinion of the performance. (Or at least distract from anything truly disastrous.)
Vaudeville performances were made up of many acts of one or a few people. Each act was prepared and rehearsed ahead of time, and many performers developed insurance material as a way of making sure that any one performance was not ruinous to their career. An individual performer might perfect an especially funny or astounding bit to incorporate into their routines, so that if more experimental material did not go over well, they could save face with their insurance bit.
Depending on the nature of a performer's act, they may have catered to the audience's belief in certain stereotypes about the sort of character they were playing. Racist comedy acts were a staple of Vaudeville performances, and insurance may have been achieved by "acting out" stereotypes believed by an audience of Anglo-American people who felt threatened by immigrants and People of Color.
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