I always make it a point to get insurance on anything I ship. If buyer declines to pay the extra, then it is clearly HIS fault if the package becomes lost.I always, always, always insure. It's not a Buyer option. For items under $100 insurance is included by the shipper - though for USPS I believe this is an exception.
For a small, low $ item, I may take a chance, but if it's lost I'd probably shrug, and give a refund. At the same time I think it behooves both partys to work together to locate the missing item.
Finally, if you purchased tracking and USPS can show it was signed for, then it's the buyer's word against the Post Office, which in my opinion makes it the buyer's problem, which he/she needs to take up with the post office. This said, I think it's good practice to help the buyer locate the item if it's clear he/she's acting in good faith.