Selling & Shipping Internationally...W/Out Under Cutting Our Selves...

Attention All Sellers....I was just pondering this latest in selling internationally....Needed some info, I was beginning to ship international, but had some questions regarding tracking, insurance protection and the cost to do this. I've just been shipping in the US, but with outside orders coming, and wanting to make sure there covered the basic rate is an $17.95, for the smallest item. I'm very Leary to ship with out. How do you offer this type of shipping with out discouraging sales? Do you deal with this type of situation? And what do you do if the buyer wants to just get the basic rate with out the protections? What do you do about taking the heat if something goes wrong?
I also see lots of sellers offering free shipping, but I see them only eating the cost. It doesn't make sense to me. It seems to me that they are only putting out more money, just to secure a sale, People can't make a living that way. What's your take on that?
I realize the more I'm into marketing, revamping my business, and watching the sales of my company, I realize there's more than trying to entice a buyers. Let me know what you think...
Mahalo so much PK