As I'm sure most people would, I almost just hit Checkout but happened to see the text below. I am also sure I would have caught/removed it from the check-out page but maybe not. I did complete my order without 'package protection' but am sending an email and probably won't order again unless their response is acceptable.
Edit: I'll probably send the email after I get shipping confirmation :)
Given the small fee in ops screenshot, most likely. We don't know who their shipper is.
My understanding is trying to get reimbursed by ups is also a time consuming headache. They make you wait a while, need evidence, etc etc etc. I can just ship a replacement right away and as long as the original package stays lost, I don't have to worry about not being reimbursed.
Also ups sucks so much I'd rather give that insurance money to someone other than them. I don't understand how ups can lose packages that are being held at a store for pickup, unless their employees steal them.