diff --git a/packages/block-editor/src/components/block-list/use-in-between-inserter.js b/packages/block-editor/src/components/block-list/use-in-between-inserter.js
index 41129fafcdf6f..ce76a84ff1dcf 100644
--- a/packages/block-editor/src/components/block-list/use-in-between-inserter.js
+++ b/packages/block-editor/src/components/block-list/use-in-between-inserter.js
@@ -14,8 +14,10 @@ import { InsertionPointOpenRef } from '../block-tools/insertion-point';
 
 export function useInBetweenInserter() {
 	const openRef = useContext( InsertionPointOpenRef );
-	const hasReducedUI = useSelect(
-		( select ) => select( blockEditorStore ).getSettings().hasReducedUI,
+	const isInBetweenInserterDisabled = useSelect(
+		( select ) =>
+			select( blockEditorStore ).getSettings().hasReducedUI ||
+			select( blockEditorStore ).__unstableGetEditorMode() === 'zoom-out',
 		[]
 	);
 	const {
@@ -33,7 +35,7 @@ export function useInBetweenInserter() {
 
 	return useRefEffect(
 		( node ) => {
-			if ( hasReducedUI ) {
+			if ( isInBetweenInserterDisabled ) {
 				return;
 			}
 
@@ -110,7 +112,7 @@ export function useInBetweenInserter() {
 				// Don't show the insertion point if a parent block has an "overlay"
 				// See https://github.com/WordPress/gutenberg/pull/34012#pullrequestreview-727762337
 				const parentOverlay = element.parentElement?.closest(
-					'.block-editor-block-content-overlay'
+					'.block-editor-block-list__block.has-block-overlay'
 				);
 				if ( parentOverlay ) {
 					return;
@@ -127,7 +129,6 @@ export function useInBetweenInserter() {
 				if ( getSelectedBlockClientIds().includes( clientId ) ) {
 					return;
 				}
-
 				const elementRect = element.getBoundingClientRect();
 
 				if (
@@ -176,6 +177,7 @@ export function useInBetweenInserter() {
 			showInsertionPoint,
 			hideInsertionPoint,
 			getSelectedBlockClientIds,
+			isInBetweenInserterDisabled,
 		]
 	);
 }