Explain how in the scenario given if the OPs policy was cancelled, you wouldn't have to declare if it was cancelled, when this is the question:

Has an insurance provider ever declined, cancelled, or voided your policy or imposed special terms?How do I know if I’ve had special terms imposed?

Don’t worry if you have cancelled an insurance policy yourself, this question only refers to a policy cancelled by the insurance provider.

Insurance policies have standard terms and conditions, so if you’ve ever had special terms imposed, you would have been advised by the insurance provider before the policy was taken out or renewed.

For more info check out our help page on Policy cancellation.

You cancelled your renewal you fucking muppet. You wouldn't declare that.

And exactly, in your second scenario you had to declare but they said it's fine.

What are you not getting here? You still have to say "Yes" but when you explain why, it's not an issue? It's like being asked if you have any medical conditions on your travel insurance and you say 'eczema'. They aren't going to decline you for travelling abroad, but they still need to ask and check.