As Loren indicates, it's extremely unlikely any insurance policy would have covered this situation.
It's not completely clear which company you've booked with. OnTheBeach.com isn't a travel company, per se. It's a US-based site for advertising holiday accommodation. it doesn't appear to cover the Canary Islands.
On The Beach Holidays (
http://www.otbeach.com/ ) seems to be more likely. Their terms of business clearly state "Cancellations within 3 months of the departure date will result in the loss of all monies paid". So it initially appears that there's nothing that you can do, but those same terms also state this:
"When making your booking we will arrange for you to enter into contracts with the Principals (tour operator/airline/cruise company/flight provider/hotel provider/ hotel) named on your receipt. For No frills and Scheduled flight bookings we act only as your agent in making your booking. For all other bookings we act only as an agent for the Principal"
That information is important because you've not actually booked a holiday
with On The Beach Holidays; you've only booked it
throughthem. (i.e. they've acted acted as an agent for the separate bookings making up the elements of your holiday). So you don't have a single contract with On The Beach Holidays; you've got separate contracts with the airline and with the hotel. You need to check the cancellation rules of the airline and of the hotel company. They might be more flexible than those of On The Beach Holidays, so you might be able to get something back.
Chris