We have just paid for our trip to Bali/Java ?Lombok and also got travel insurance for about 150 each. WE are australian were in kuta on the nite of the first bomb( with our then 4 year old) and had to come back home early. we have been 3 time s since and we always avoid kuta/legian/etc like the plague. having said that we stay one night either side of our flight and keep low key. the last time we were in bali in 2005 the bomb went off just after we left. However the main streets of Kuta were awash with the ugly aussie, you know dressed inappropriately and drinking on the streets, just because that behaviour seems to have been taken on by many australians as their 'rite' to act it out anywhere accross the globe it doesnt mean it wont offend , no matter how much the locals appear to tolerate it .Indonesia after all is a conservative country. Try Ubud , candi dasa, padangbai , or even up north if you want to feel safe, just stay away from the massess, its much more enjoyable like that anyway.
In addition to that , our prime minister is just playing popular politics and covering his backside with his fear campaign against Indonesian "terrorists"as he has an election looming and his popularity is spiraling.
In the event of an attack happening from experience i can tell you all can do is sit tight like we had to for 24 hrs in our hotel complex and either continue your holiday ( we had people literally exiting to the airport which was clogged.) as we did to Ubud and then booked an early flight home which was assisted by the australian govt.
Yes it was scary and eary as the streets around kuta were literally empty and there were people at our hotel who narrowly escaped the nightclub blasts. but generallygetting to somewhere quieter is a good bet to arrange your trip home if thats what you choose, in hind sight we should have stayed the 3 weeks we planned but the media in Australia went histerical with its coverage and our families were very distressed , while in Bali it was quite calm afterwards. It hasnt deterred us from visiting this wonderful country with its lovely people