You're skipping the preceding clause, which is the operative one:
Covered Trip means any pre-paid tour, trip or vacation when some portion of the cost for such travel arrangements less any redeemable frequent flyer miles, points, coupons or certificates, or other types of redeemable Rewards has been charged to your Account:
What they're saying is:
You're covered for your award travel if you pay any portion of the fees with CSP.
And the clause you quoted says:
Or, you're also covered if you pay for the trip in UR points (ie you don't pay any cash).