Do you mind if a real Phknlwyr chimes in?
Pick a number that will make you somewhat whole - i.e. covers advertising expenses and other incidentals that you incurred as a result of the contract. Double that number and offer to refund the difference to the buyer.
The term "reasonable" in any contract, but especially a sales contract, is an invitation for litigation. You may want to consider quantifying the "reasonableness" of the insurance with a maximum cost to Buyer. What may seem reasonable to you may seem outrageous to a buyer. If you agree on a sum in advance (after checking with your insurance agent ahead of time) then you will not be faced with a subjective test such as the one you presently face.
If you have the deposit in your possession, then the onus is upon the Buyer to sue you for is return. If you get into litigation, you will need a lawyer $$$$, an insurance agent as a expert witness $$$$, and the time and aggravation to see the matter through to the end. If you sales contract provides for attorney's fees to the prevailing party if litigation is necessary to enforce the terms of the contract, take the matter to an attorney and request that they take it on a contingency basis.