does insurance cover the cost of shipping the item, too?

Shipping insurance only covers the vaule of the item, not shipping itself. So if your item is $49.99, you would charge the shipping cost for that amount only, no shipping included. Shipping is for shipping only, and cannot be insured.

From Auctiva:

"Shipping costs must be included in the declared value in order to be paid with claim. Handling fees and insurance fees are excluded from coverage."

So insurance does cover shipping, as long as you add the cost to the declared value.

And make sure your item is "covered" under insurance of the postage you are using. For instance, USPS will allow you to purchase insurance on anything you desire, but there are many things they will not pay you for in a claim. Like used electronics for example, are not covered. Moral of the story here...make sure you (declare)write down something they cover if you pay for insurance.