Got home on Weds after a 4 day delay... and having a package really helped us and worked in our favour. Yes, they are more expensive, but I'm glad I did it this way this time (have done DIY in the past).
Virgin Atlantic cancelled flights... all they did was give you a list of hotels which were charging a price they would cover, told you to keep all your receipts, and gave you an address to send them to once you were home. It took an hour and a half on hold to speak to someone each time we called, and at one point the soonest flight they could get us on was 2 weeks away. This was before they announced the extra flights.
After speaking to a Virgin Holidays rep, we were moved to a hotel that they were paying for (rather than us paying then claiming back - a big help!), we got discount vouchers to eat in the hotel, they laid on coaches to take people to and from the airport when it looked like our flights were going (several times), there was a rep there every morning with updates and information, and it really really helped that you knew someone was looking after you. We can still claim back all the things we kept receipts for.
Insurance will only give us a payout for the flights being delayed over a certain length of time, nothing more. Every little will help though.
You can't assume that a disaster will happen on every holiday, and DIY is so much cheaper, but this time we were very thankful that we'd paid the extra for a package.
I guess it's a balance... if it was just me and DF we might take the DIY chance and just make sure we had a credit card or some other means of supporting ourselves fully should the worst happen. But if we're going with his 2 boys again like we did this time, then I think I'd have the package, just for the support network should anything go wrong.