Auctiva's storefront is a composite of all of your eBay listings. If you only list auctions, and don't have an eBay store, you can still go to your Auctiva store and see all of your items there in one place. It doesn't cost anything, so there's really no reason not to have an Auctiva store.
However, it's not a replacement for an eBay store. An eBay store will draw many more people, as long as you can successfully drive traffic to your store (usually through auction listings).
You choose whether or not to offer insurance to your customers when you create a listing with the editor. When you post the listing, it will show as "insurance optional" or "insurance required", etc. in your eBay listing, depending on how you set it in the listing editor.
It's not so confusing as it sounds, and once you've done it a time or two, you'll get the hang of it.