Praise be to Allah.
Commercial insurance of all types is haraam, because the insurance contracts involve riba, gambling and ambiguity. This has been explained in several previous answers. Please see the answer to question no. 39474 and 8889.
What you should do is ask the airline company or the travel company about the luggage. This applies if the airline company or the travel company is responsible for lost luggage.
But if the luggage was lost because of carelessness on your part, then you have no right to go back to them and ask for the value of the luggage.
If an insurance contract is done, the policy holder has no right to take from the insurance company any more than the equivalent of the premiums he paid. This has been explained in the answer to question no. 103233 and 103919.
Based on this, if the compensation that was paid to you is equal to the premiums you paid, or less, then this money is permissible for you; if it is more than that, then you should give the excess amount to charitable causes.
And Allaah knows best.