A system for installing a blade insert between a root portion and a tip portion of a rotor blade of a wind turbine is disclosed. The system may include a root cradle assembly configured to support the root portion of the rotor blade and a tip cradle assembly configured to support the tip portion of the rotor blade. At least one of the tip cradle assembly or the root cradle assembly may be movable relative to the other of the tip cradle assembly or the root cradle assembly to allow the tip portion to be spaced apart from the root portion after the rotor blade has been divided between the root and tip portions. In addition, the system may include an insert cradle assembly configured to support a blade insert for the rotor blade. The insert cradle assembly may be configured to be positioned between the root cradle assembly and the tip cradle assembly so as to position the blade insert between the root portion and the tip portion.