Me, neither, and I hear what you're saying. Have had up-close experience with similar strains of mental illness with family members--one paranoid schizophrenic and one borderline personality disorder (MIL for 32 years). I've also grown up in a family with depression fairly strong in the family tree. Because of my experiences, I have much compassion for those struggling with brain chemistry issues that are beyond their control...but I'm also not blind to the very real risks in lifestyle and choices of those who suffer from it. And I think it'd be wrong to pass off the daughter's concerns as solely being due to vengeance. Family history can also give those members insight that people outside don't have (though it'd probaby have been wiser to save that just for LE at this stage).
I'm going to stick my neck out and admit to being surprised not so much that she mentioned life insurance that same day to her daughter (I could write that off to a number of things, including state of mind or $ needs)...but that the baby even had life insurance. (Didn't she opt out of pursuing some medical care due to not having health insurance?)
Do people regularly buy life insurance for babies nowadays? (We've always only had it for head of house--though maybe it's our choice that's weird, lol.)
Not criticizing or accusing...just surprised, once again, in this strange case.