The "automatic insurance" thing is called section 75 protection. Legally it's more limited than you might think - it only applies to purchases over £100 and under £30000 for example and I think there's a lack of clarity if eg PayPal purchases are covered or not even within those limits.

However, the debit card industry (as do some other oddities like Amex charge cards) largely voluntarily offer very similar protection to section 75 on debit card purchases and the credit card industry largely voluntarily offer the same protection on purchases under £100.