As long as the reason for the cancellation (by the guest or the host) is within the terms and conditions of the insurance, this will cover the total amount or a percentage of the total amount, depending on the type of insurance that was bought.
The table below will show you the different insurance options:
For example: I am a guest and I was supposed to stay at my host's house for 6 days. However, I have been feeling ill during the last few days and therefore, I won't be able to travel anymore. Since I bought the insurance option for 7€ when I finalised my exchange, my plane tickets and some other expenses will be reimbursed (up to 600€, 100€/day = 600€) when I present my receipts*
*According to terms and conditions of the insurance bought