Blackjack: If you're insured, and bust, do you collect on the insurance?
Option B, but not for the reason you think.

You have made two errors:


When you take insurance, you may insure only up to half of your original bet, turning what would ordinarily be a loss into a push at 2:1. In this case, if your wager was $200, you could insure for up to $100.
Once insurance is "closed," the dealer checks to see whether he or she has a natural 21. If he or she does, it is revealed immediately, your insurance is paid out, and all other players lose[*]. If he or she does not, insurance is collected, and the hand proceeds normally. In no case would you still have an insurance payout pending and get to hit.


[*]= Barring those who had naturals themselves, who either took the option for "even money" before insurance had closed, or will now "push" against the dealer's 21.

So, in this case:


You bet $200 ($800 left)
You take insurance of $100 ($700 left)
The dealer shows a natural 21. You lose your $200 bet, but your insurance bet pays out 2 to 1 -- your initial $100, plus $200, for a total of $300 back to you.
You have $1000, same as you had before this hand.