the $250k only applies to USD held by USA residents. they are covered by FDIC (government) insurance:
If you are a United States resident, your Coinbase USD Wallet is covered by FDIC insurance, up to a maximum of $250,000.
as for digital currency:
Digital currency is not legal tender, is not backed by the government, and digital currency accounts and value balances on Coinbase are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections.
they store "less than 2% of customer funds" in hot wallets.
those funds are fully insured. so if a hacker drains a hot wallet, they will fully compensate customers. but if their cold storage gets compromised, their insurance won't cover anything.