A couple of years ago on eBay I had a run in with someone who purchased an item from me, then a few days later sent me an email explaining her child ordered it and thought it would be cool to track its progress online.  Since I had a few transactions on eBay and sold a few items  I did not think twice about telling her that I was sorry I did not have that code.  Within a couple of days she filed a claim of nonreceipt and won. This was less than two weeks after the item was shipped from overseas to the United States and after the date the postal service later determined the item did arrive at her address.

Paypal's response was, insurance was not enough, even though a few months later I was able to file a claim with the USPS and was able to prove she did receive the item.  Since she received the item, I was not reimbursed by the USPS.  After providing documentation from the USPS that the item was received at the address the buyer stated I received a credit for a small portion of the price from PayPal due to the length of time that had passed since the transaction.

Insurance will not protect you from buyers who will work the system this way since you have to wait to file a claim and by the time you file a claim and find out the buyer was fraudulent, it is too late with PayPal. 

The moral of the story:  Get delivery confirmation, Insurance is not enough with Paypal.