So, the scenario you're suggesting is one that I don't believe has ever played out, I can't think of a player ever getting pre-emptively bought out due to health risk that had yet to materialize in an actual issue. Also, I think the pre-exisiting condition insurance scenario would only apply if the condition existed prior to signing the contract and the insurance company excluded it at that time. I don't believe that's the case here.
wrt how much insurance covers, 80% at least in most cases, unless something has changed since the last publicly available information. Buyout has the advantage of spreading it out and the wonky rules where we have some expensive years and some cheap rules. So while the cost is similar, LTIR essentially allows for the full cap hit to be used, albeit with some jumping through hoops, that's clearly preferable to having buyouts on the books.
As for the worst case scenario of a subsequent injury not being enough to LTIRetire him but enough to make him never live up to his cap hit, I feel like this is just as much a concern with almost any big contract, are we worried Pinto's surgically corrected shoulder won't hold up too? The game happens fast, anybody can have an injury derail their career, I feel like speculating that Norris specifically is at higher risk when he seems to be coming around as expected is a bit much, is it a concern, sure, but is it buyout worthy? That seems like quite the stretch.