Paypal will screw you.
They will definitely side with the buyer unless you can provide online tracking of the parcel, even then it will be tricky. It's worse if you have the little shield appear next to your paypal logo, which happens after 50 positive feedbacks and feed back better than 99% or so. They virtually guarantee giving a refund to the buyer if you have the shield thingy.
Dealing with them is impossible, it is just automated email responses, and the phone is not answered.
I think your insurance claim will be accepted though, but don't show them that photo!
The best way is to buy with Paypal, sell without.