LA_FadeAway: did they not even give you the option of paying the cancellation fee to get the points & Certificate back?
Seems like you should have the choice of either the points lost or paying the fees and getting the points and FNC back.

I would hang up and call again, don't mention anything about insurance and just inquire if there is any way to keep your points but ok with paying cancellation fees.

I would personally only pursue this if I really did want/need to cancel ... hard to tell from your post if that is the case or you are just covering your bases.