Just been watching excerpts from Celtic Connections on BBC Alba where a young female band stated their next number would be a "Cover".
Personally, I've never considered "covers" to be folk or trad music speak. Generally, even when musicians and singers perform or record a song or tune by a known composer, we (or at least I do) usually think of their versions as interpretations rather than mere covers.
I've noticed such talk is "creeping in" a lot more these days and may have much to do with the increasing number of singer songwriters who have been latching on to the folk scene. For me, there is a difference between musicians and singers who have a grounding and background in a particular genre of music and compose new material as opposed to those for whom "Singer/songwriting" seems to be a genre in it's own right.
Certainly, I wouldn't refer to performances of traditional songs and tunes as "covers" . Likewise, those songs and tunes by known living musicians which have already passed into the tradition or have become firm favourites.