I would not trust the judgement of the "well if we hit it, you do have insurance right?" guy. My thought process is similar to David's, except I do teach. I also do skippered charters in which the charterer is responsible for the insurance. If they are uncomfortable, we do not do it. Likewise, if I am uncomfortable, we do not do it.
Much of my business comes from referrals. If I want to stay in business I need to be safe.
Good advice. I was under severe time contraints and needed to move the boat so basically took who I could get, without even first meeting the person. In the future, will try not to get into that situation again.