Your refund, if any, usually decreases as you get closer to the departure date maybe to nothing at all if you cancel within the last few weeks. Trip insurance pays the difference between what you pay and what you can get back if you cancel. Trip insurance covers a wide range of reasons for cancellation. You're covered if you, a traveling companion, a close family member who remains at home, or a business partner gets sick or suffers an accident or if your house burns down. You're covered if you or a traveling companion are called to jury duty or if severe problems break out in your destination area.
Policies vary as to specifics, but most are similar.
They also cover you if your tour operator or cruise line fails as long as you don't buy the insurance from that same tour operator or cruise line. Most insurance doesn't cover you if you cancel for a business reason a big gap, for some travelers. You probably do need trip insurance when you buy a cruise or tour, or rent a vacation house or apartment. You usually have to prepay the entire amount, often months in advance, and nobody can predict what can happen between the time you pay and the time you leave. You probably don't need trip insurance if you buy separate airline tickets and reserve but don't prepay hotel accommodations or a rental car.