Originally Posted by Often1

1. The instant that you are unable to use the hotel room, call the property and see if it will not permit a cancellation, or at least a credit against future use. Many properties are quite decent about this sort of thing when there is a provable event, e.g., they can look up your flight number.

2. This is a consequential loss which you either insure or accept the responsibility for yourself.

3. As you are now leaving more than 2 hours later than originally scheduled, you will be entitled to EC 261/2004 compensation unless the cancellation was for an "extraordinary circumstance." This gets to the question of why the flight was cancelled. If cancelled for other than an "extraordinary circumstance" your compensation makes you whole as it defrays the hotel room (one would hope).

Finally, don't take the word of your travel insurer over the phone. Read your policy carefully. If the reasons for this loss are covered, push back. If they are not, drop it.