Instagram reserves the right to sell your photographs comes into effect on 16 January, 2013.
If Instagram is to sell photos of users, then the prospective buyers would be able to view all pics/albumbs/folders set for private or public by users. Also there is no statement in the TOS that deleting an user account terminates Facebook rights to the respective deleted account. It would still retain your photos my means of back-ups created at intervals.
Excerpts from the TOS under Rights
- Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you. If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to this provision (and the use of your name, likeness, username, and/or photos (along with any associated metadata)) on your behalf.