Does travel insurance cover Airbnb cancellation?

Yes, but you may want to read the coverage details of the travel insurance before buying to see how much can be claimed

tl;dr: Yes.

"As Airbnb is considered pre-booked accommodation, your travel insurance policy covers the value of the unused arrangement if you end up out of pocket following an insured event (e.g. you may fall seriously ill and have to cancel your trip; this pre-paid accommodation is covered for any amounts you are not refunded by the host)."

https://www.travelinsurancedirect.com.au/blog/a...