The way Coinbase words it, they may be only insuring 3% of your funds. The online wallet is insured[1], but there may only be 3% online[2] meaning a malicious employee or just a mistake leading to their cold wallet being lost probably isn't protected.
[1] http://blog.coinbase.com/post/95927658922/coinbase-is-insure...
[2] https://www.coinbase.com/security