If you cancel a portion of your trip or your entire trip for a covered reason, you won’t encounter this situation. You’ll simply make your claim and receive a refund as long as the cancellation was covered by your policy rules.
If a portion of your trip or your entire trip is cancelled by a travel supplier, say a tour operator, an airline, a cruise line, for example, then it’s their responsibility to provide compensation to you. In the case of most travel suppliers – airlines and cruise lines in particular – this compensation is in the form of future travel vouchers and sometimes this doesn’t appeal to the traveler who may feel they have a right to receive cash reimbursement instead. Unfortunately, if a travel supplier’s compensation doesn’t appeal to you, you’ll have to take it up with the travel supplier because they’re the ones responsible in this situation.
You can think about it this way: if a travel insurance company provided reimbursement for cancellations where the insured also received future travel compensation from the travel supplier, then the insured would essentially be doubly compensated.
Similarly, you wouldn’t expect to be doubly compensated for a car accident by both your own automobile insurance and the other participant’s automobile insurance. As long as the car is repaired or replaced, that’s all that is expected. Travel insurance companies, just like any other insurance provider, have the right to limit their liability and this is one of the ways they do that.