If they cancel through the site they are entitled to a refund as per your moderate cancellation policy.
https://www.airbnb.com/home/cancellation_policies#moderate
With a death in the immediate family, cancel their stay is probably the last thing they would worry about, so I would suggest you remind them to do so.
It is a case where a travel insurance kicks in, but insurance would not cover what exceeds your cancellation policy, so it is in their own interest that they log into the site, cancel and get the refund they are owed by airbnb. This way they will also have all the correct paperwork in place when they forward a claim to the insurance.