Trevor,
The answer to your question is that if you take out a typical 'model boaters' insurance policy you wont get anything if your boat sinks in the middle of the lake as its considered a natural hazard of the hobby and is usually excluded from the cover.
Generally speaking, the insurance cover which is demanded by local councils, for example if you wish to sail on their park boating lake, is civil liability cover. It is to protect you against claims which arise from your activity. For example if you poke someone in the eye with your transmitter aerial and blind them, your motor starts inadvertantly just when a member of the public is examining your propeller and gets his finger chopped off, or you boat goes out of control at high speed, flies up the pond bank and strikes little Johnny in a critical part of his anatomy while he's watching from his pram.
I suppose it would be possible to insure against the loss of your own boat while on the water but I suspect it would be difficult to put a value on the model (see the build me a lifeboat thread for example), and the premiums would probably be prohibitive.
The above primarily refers to policies taken out by individuals. Where the policy applies to a club then all sorts of other issues are usually covered, such as claims for inappropriate advice or training, libel arising from club newsletters or websites (must watch what I write), employers liability, vulnerable persons abuse and so on.
I must admit that if I was not a member of a model boat club club, I probably would not have bothered with insurance as I would have considered the risk to be so remote. However I used to fly model aircraft and in that case I definitely did take out the BMFA cover as I could see the real possibilty of one of my models going out of control and doing somebody or something some serious damage.
Gareth