I would feel cheated unless the seller told you that he self-insures or uses a third party insurer. It doesn't sound like that was the case. So leave feedback stating clearly that you didn't get insurance when paid for. Personally, I would mark it as neutral feedback unless you are certain he doesn't self-insure and wouldn't honor a claim, in which case negative feedback is warranted. If he does tell you he self-insures, then there's no justification for negative or neutral feedback in my opinion. In that case, one never knows for sure if he would really honor a lost or damaged item, unless you have data from another buyer.

There are a lot of threads on eBay's Answer Center about this exact situation. See http://answercenter.ebay.com/thread.jsp?forum=14&thread=810013315&message=810063628&q=insurance#810063628 for one example. Here's someone else's comment about self insuring from another eBay Answer Center thread:

Self-insurance
Posted: January 8, 2005 9:17 PM
ssn578 (325) (view author's auctions) Posts: 1503

> (roxi)

Here’s the FTC’s take on self-insurance and its relation to “customer satisfaction,” rather than any relation to true insurance that would be regulated.
“Instead of directing customers to make claims against the common carriers who may be responsible for losing merchandise, most merchants reship for the sake of customer satisfaction. To pay for these reshipment policies, some merchants ask customers to buy ‘insurance’ or provide it as an option. By offering insurance, the merchant implicitly represents that it will honor any claim of nondelivery by providing prompt reshipment or, if reshipment is impossible, a prompt refund. It would be improper to collect fees from customers for reshipment insurance and not respond promptly and appropriately to their bona fide claims of loss. http://www.ftc.gov/bcp/conline/pubs/buspubs/mailorder.htm

Here’s the California Attorney General’s take on self-insurance (whose jurisdiction we, in part, fall under by using eBay – see further below).
"The term 'self-insurance' being a common and accepted concept in contemporary risk management (Nabisco, Inc. v. Transport Indemnity Co. (1983) 143 Cal.App.3d 831, 836), refers essentially to the setting aside on some systematic basis of designated sums of money in a special account to provide a reserve to cover specified losses. (Cf. Webster's Third New Internat. Dict. (1961) p. 2060.) Self-insurance involves neither the shifting of loss to another, nor the distribution of a loss among a greater number. Hence, it is not, in a true sense, insurance at all. Rather, self-insurance differs from non insurance only in that the former is a programatic or systematic means of covering one's own losses." [sic] http://167.10.5.146:81/ISYSquery/IRLDD0C.tmp/2/doc

"This Agreement shall be governed in all respects by the laws of the State of California as such laws are applied to agreements entered into and to be performed entirely within California between California residents." http://pages.ebay.com/help/policies/user-agreement.html