There is a way to charge exactly what shipping and insurance will cost, regardless of what the item sells for, and still cover handling costs, packaging, etc. We use eBays Shipping Calculator on all our items. If a Buyer is signed in, the Shipping Calculator shows, prior to bidding, the cost of shipping for each method offered by the Seller, plus insurance at a particualr price, based on the Buyer's zip code or country. When setting it up the Seller enters the weight of the item and a flat-rate "handling charge" (which is not shown to the Buyer and is intended to cover the cost of packaging, signature confirmation, supplies, travel, time, whatever.) This way the Buyer knows what the cost will be and the Seller doesn't lose money on the shipping.
For an occasional Seller it may not be a big deal to drive to the post office, find an old box, etc., but once you start selling regularly those things add up; either the Buyer is going to pay for them or the Seller is going to pay for them, but someone, for SURE, is paying for them =)