Your host is very kind if they are agreeing to give you a full refund, when you are not entitled to one under the policy you booked under. @Tai438
As the host has agreed this with you, I would ask them how they want to handle this.
Normally you would cancel and they would issue a voluntary refund (obviously less the Airbnb fee).
Is there any reason you wouldn't claim this on your travel insurance? In this way you wouldn't leave the host out of pocket and could claim back the whole fee not just the host portion.