The trouble with a question like this is that everyone has their own ideas about castration generally, so any answer will be laden with personal opinion, one way or another. Same with vets' opinions. And there are so many studies that serve to back up people's views, in whichever direction they take them...
I live in SW London, where the vets are very keen to get every animal castrated or spayed (and I happen to agree). They are also keen to get situations like this sorted out as early as possible. A friend of mine has a cocker puppy who will be almost 7 months next week and is about to have the operation to have his two undescended testicles removed - she has taken the vet's advice on the timing. I had my dog castrated at almost 7 months too, and he has shown no signs of either a change in personality or coat, 4 months on.
I really think this is something that you have to just go with your own gut feel about. Your vet will have directed you, and you will know whether you're happy with it.
With respect to the insurance, most policies don't cover castration, and some won't cover the undescended testicle thing unless you've had insurance with them since they were 8 weeks, or something ridiculous like that - my point is, check before you take out a new policy. It might be worth continuing the free KC one if they cover it - you could always change afterwards. I'm not sure if this would be covered anyway, but might be worth checking. Unfortunately when you apply for insurance quotes you have to give all your details, so it's difficult to ask a question like this without it going on your record! I guess you could call anonymously and ask the question!
BTW my pup arrived with one undescended testicle and I was a bit annoyed with my breeder for failing to mention it, but it came down at about 5 months anyway. It appears to be pretty common. You should probably tell the breeder as I believe it is hereditary and the sire's owner should be notified. My pup's castration (both descended) came to £260, but that's in London where fees are probably about double out of London. I would think this kind of operation would cost more, as it would probably take longer, especially if either testicle was difficult to find.