It is nicer for the shipper to decide the value and pay the corresponding price for that. Because you need to know the replacement value of that lost item. This is dependent on all kinds of factors.
In this case the shipper is the company behind the Playdate, so it seems weird to me they wouldn't insure their own stock. But maybe there's a good reason why this isn't done?
If insurance costs you more than lost shipments, it stops making sense to pay for insurance. If insurance costs less than lost shipments, it stops making sense for the insurer to offer you insurance at that rate.
Insurance works when the loss is disruptive to your cashflow. If I can't afford to absorb that loss right now, it may be worth finding an insurer that can. If I can afford to absorb that cost, it's almost always better to leave my money working for me, than working for the insurer.
If you're shipping in volume, self-insurance almost always works out better. You can bet amazon don't insure their shipments to you. If they take the potential cost of insurance, stick it in a pot, and dip into it when there's a shipping issue - that pot should never run dry. If that pot runs dry, it means insurers are operating at a loss, and they're not going to stay in business long.