While I think it is definitely important to have a cancellation policy in place, life happens–and I think it is important to make some allowances for clients and class participants. Perhaps you could allow the participant to make it up within a certain time frame. After that, they lose the session.
Sometimes you will have to deal with those who abuse a cancellation policy, but others have legitimate reasons for needing to cancel, so a firm but fair policy would be appropriate. Yes, you have a business to run, but if you show your loyalty to them, they may just be repeat clients for you and refer others.