XF 1.2 is it ok to delete install folder after installation

Nothing, rebuilding the master data won't effect the running of your forum if it is smooth.

They cannot reinstall without entering passwords, the folder is fine being there.
 
I never remove it, instead I chose to block it for external access... as well other files.
https://www.axivo.com/community/install/
https://www.axivo.com/community/library/
https://www.axivo.com/community/library/config.php
Code:
[root@chronos ~][root@chronos ~]# ls -lah /var/www/xenforo | grep install
drwxr-xr-x.  4 root    root 4.0K Nov  6 19:27 install
# ls -lah /var/www/xenforo/library/config.php
-rw-r--r--. 1 root root 737 Aug 25  2012 /var/www/xenforo/library/config.php

looks like you have blocked directly in server

how to do in shared hosting
 
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