are hotel bookings cancelled due to possible volcanic ash covered by holiday insurance

Hi heartless1, and welcome to the forum.

It seems that would depend on whether your policy covers you for such events, and whether you took out the insurance before the event happened.

Have a look at this advice from The Guardian...

http://www.guardian.co.uk/money/2011/may/23/volcanic-ash-travel-insurance-iceland-volcano

Assuming you've already arranged your insurance, check your policy (including the small print!), or contact your insurer.

Hello heartless1,
One more point in addition to what fruitcake said below.
Most of the big chain hotels allow you to cancel your booking 24/48 hours before arrival, if you have booked with them directly. Personally, this has been my preferred way of booking hotels. Another advantage is that you only pay for the room once you check out.

Not exactly an answer to you question Heartless1 as you are talking about hotel bookings, but I heard on the radio yesterday that if you cancel a holiday just in case the volcanic ash causes you a problem (for example if you must be back at work on a certain date or are going to a wedding and cannot risk a delay) then this is an 'elective' cancellation and is not covered by holiday insurance. If the holiday or flight is cancelled by the tour operator then you will be covered by insurance as long as it was taken out before the latest ash event.