I am not worried so much about Instagram, I don't and will not use it. However, it's the precedent it sets.
For sake of argument, if the Instagram policy holds, what other photo sharing websites will claim the same thing down the road? Notice there is no "opt out" unless you delete your entire library. even there, I am not 100% certain. Usually those End Users agreements you have to click on are pages and pages long, so maybe the web site has a backup copy of your images they can some day use?
Call me paranoid or an idiot for thinking so, I've been called much wosre in the past I don't care, it's just establishing a precedent that others may follow that in the long run, bothers me.