Coinbase is not immune from failure, government intervention, or fraud. The insurance no doubt has limits, and if you've ever filed an insurance claim you'd know that if something goes wrong you'll probably be up a creek without a paddle.
Insurance companies almost always win, that's how they make money.
The problem here for most of the people currently FOMOing in, is that there are no "good ideas" as far as coin storage goes. Storing on shady exchanges is risky, but due to lack of knowledge / technical skill, many/most would also be at risk of losing their coins one way or another if they held the keys themselves.
What this tells us, is that this technology isn't ready for mainstream use.
It's not as if people are born with innate knowledge of personal finance skills. These are skills which must be learnt like anything else.
Not exactly. They make money off pricing their insurance higher than the chances of it happening.
Just look at how health insurance works: without government regulation, most of the day to day healthcare you actually need isn't covered under the terms of the insurance. For example, contraceptives.
Insurance runs on the same premise of making money a casino does. If there was no casino edge, there would be no cash for the casino 'float' back into bets.