> Not having it inserted defeats the whole point

How so? I would keep this on a keychain or lanyard (it looks rugged enough to handle that sort of environment). When I need to authenticate, I plug it in, when I'm done, I unplug it. That seems a lot more secure than leaving it in the computer all the time. If someone gets my computer and the YubiKey is always installed, that sort of defeats the purpose of having a separate hardware security device. In that case, why not just use Keypass?