I think she's truly nuts JMO
If she were truly nuts, she would not have asked her friend, MG, to lie and say that JJ was with her. She wanted someone to continue with the lies and deceit because she knew that the disappearance and murder of her children was wrong and illegal.
She is not insane in the legal sense of the word. She is evil and committed all of the murders for the love of money. She was especially enraged when she discovered that Charles had changed the beneficiary. His life may have been taken; however, he got the last laugh.
IMO, come hell or high water, she was not going to allow JJ to live with Kay and Larry. They were now the enemy. I feel like, in her entitled mind, she thought that Kay should give her the insurance money because, as Lori put it, she is the one who had "five" kids to support.
Lori also knew that Tammy was going to meet her demise because she used Charles' credit card to purchase her wedding ring shortly before Tammy's death.
It's all about greed on both Chad's and Lori's parts. Of course, Chad also felt like he hit the jackpot with his new, pretty "cheerleader" wife, the type of girl he wished that he could always have in high school and now did have.
I still do not believe that Alex's death was natural. It is way too coincidental that he dies right after he gets married and right after MG confronts Chad and Lori about their lies.
JMO.