On our last cruise, my sister was to share a jr. suite with us, but at the last minute she decided not to go. We didn't even ask for a refund, given the fact that this decision was made at the last minute and we did not purchase the insurance. A few weeks after our cruise, we received a check from RCCL for her portion of the fare. Needless to say, we were pleasantly surprised. It's these kinds of things that keep bringing us back to RCCL.
As f-mattox correctly noted, it depends on the insurance policy. For instance, if this was a pre-existing condition, the policy wording will be crucial. But be assured that if he gets a refund, so will his wife. (Most, if not all, policies provide for immediate family traveling with you.)
Last April we had to cancel a cruise because my wife's mother fell and broke her hip. She wasn't going on the cruise with us but we still got a full refund. This happened a week before our cruise. The only thing not refunded was the cost of the insurance and our airfare. We didn't buy insurance for the airfare. It took a couple of weeks before we were refunded.
I haven't been on a cruise yet. For my parent's 50th wedding anniversary, they decided to take the whole family (14 in total - kids and grandkids) on a cruise for Christmas. 9 family members made it to Miami and the cruise, and 5 of us (including my parents) missed a connecting flight in Chicago (darn airlines). We never made it to Miami or the cruise. Spent 26 hours in O'Hare trying to get on a flight - no luck. We were so disappointed. My dad bought trip insurance and we're still waiting to see if he'll get his money back. In the meantime (Dec 26th), my dad booked the 5 of us on the same cruise for spring break (and upgraded us to balcony rooms!). 5 weeks and counting until our very first cruise!