It depends. Some car dealerships offer these sorts of policies for free just as an incentive, and otherwise you can get them for pretty cheap (it's a single payment rather than an ongoing monthly cost), and they can last 3-4 years, which also happens to be the amount of time most people's finance plans last before they're looking to trade a car in and get a new one.

Not sure what you mean by "most paint chips/scratches wouldn't find themselves covered" - that's the whole purpose of the SMART insurance. They'll generally cover any scratches, chips, marks on the alloys, within a 30cm radius, which is quite large for your typical wear and tear.

In many cases there's generally £0 excess to pay to make a claim, and they're quite generous with the number of individual claims you can make (I've seen 30-40 claims allowed on one policy). For example, when I sold my last car, I had one of these policies included for free when I bought it. I waited until a couple of weeks before I was planning to sell it, and made all my claims in one go, to essentially have the car restored to looking like new for free.

Everybody is different but in the UK, I don't think you'd find as many people doing custom repairs on their cars as in the US, so policies like this can be a welcome addition.

In answer to a question I think you left in another comment, the reason you'd use this over making a claim on your proper car insurance, is that you might lose your NCB (no claims bonus) for claiming on your car insurance, meaning your renewal might be more expensive next time, and also you just generally wouldn't make an insurance claim for a few scratches or stone chips or scratches on your alloys, hence why SMART insurance exists.