Does Daily timeout protection help?


The timeout protection is for the correspondence-style (days per move) games, not for the OTB style (full game in a few minutes) games.
As to whether its worth it to upgrade for the timeout protection, that depends on how many correspondence-style games you plan on playing and how often you might not be able to log on to the site in time to make your moves.

It's never kicked in for me. I got an email once saying I was put on vacation for a game I was low in time on, but when I opened the app it was a loss due to time out.

The automatic time-out protection can come in handy (especially if you're a slacker, like me), but it's not the only perk of upgrading -- more tactics exercises, tournament privileges, no ads, and the knowledge that you're contributing to a pretty cool, useful, and educational organization are good perks, too.