Id say skip both personally and just treat it like you would a new car. The new iphone model is only 6-7 months out, I cant see buying insurance or extra AppleCare at this point for a 3GS.
You also have until the end of the 1 year to decide to buy the next year so I wouldnt jump to any decisions until youre sure you wont upgrade to whatever comes out this coming summer, then you spent nearly $100 for nothing that could be put to the new model.
Ive heard Apple is pretty good about replacing them though, its hard to prove a crack in the casing or screen was the customer's fault, and since Apple makes their own hardware and software, they usually want the customer to be satisfied and keep a high satisfaction rating.
Personally ive never had a need to take mine in, i keep my phones mint, but i have had to replace a frayed usb cable and they overnighted it free with overnight return all for free. So it was a good experience with their CS.
But I think an otterbox is a little bulky and extreme for normal dya to day use. Get a good thick gel/silicone skin and its should be good shock protection. I use an iskin and its decently thick and cushy.