1st and 2nd post is insured up to £39 - as already said, as long as you get proof of postage.

If the buyer claims they haven't received the item then just lodge a claim with Royal Mail and get your money back that way.

If you don't want to be left open to the possibility of Paypal disputes being found in the buyer's favour then do as their terms and conditions state and ensure you send via an online trackable postal service.

As much as I hate Paypal, if you know how things work then nine times out of ten you won't have a problem. There are obviously exceptions but for the most part ....