Sort of like credit card companies give you a 30 day grace period to pay your balance (it's not due immediately upon using the credit card).
You are correct that you do not need to buy the insurance through USPS when you get it from Auctiva. When you purchase shipping insurance through Auctiva, they are fronting the money to purchase the insurance policy for you (through a third party insurance company called U-PIC). As you purchase insurance for your customers, you build up a balance that you must reimburse Auctiva for - but they don't really bug you to pay it until you've built up a balance of $20+. However, you can add funds to your account at any time you wish (using the same procedure I posted earlier).
For example, say a customer purchases a $30 widget from your eBay store, and you are charging $5 for shipping. The customer also wants insurance on the item, and pays you an additional $1.65 for it. So the total the customer pays you is $36.65 ($30 + $5 + $1.65). You print out your shipping label through PayPal (or whatever method you prefer) - but you do not purchase USPS insurance. If you are using Auctiva Checkout, the insurance is automatically purchased for you. If you have Auctiva Checkout disabled (many Auctiva users don't use their Checkout - including me) you need to go into your "Sales" tab to manually purchase the insurance for the shipment. Keep in mind that, although Auctiva insures the item for you, they have not yet been paid for the insurance that they have provided to you - the customer has paid
you $1.65 for the insurance, but you have not yet paid Auctiva for it. Auctiva keeps a running balance of your insurance purchases, for which you will eventually have to pay.
I know it sounds a bit complicated at first, but you'll get the hang of it. Insurance is the only thing that Auctiva charges for, and it is in fact one of the reasons they are able to keep the rest of the service free.
You can see Auctiva's insurance rates here:
http://www.auctiva.com/help/pages/My%20Account/Checkout...ettings/Overview.htm