First time I've heard of a housebuilder wanting the new homebuyer to take out insurance against not being able to exchange contracts in 4 weeks, which unfortunately is the usual time in this industry and means that the buyer must have the 10% exchange contracts deposit available in the four weeks and a mortgage offer in principal.
That said, if you have sold your existing house or have the deposit ready, you are in a strong position to get the 4 weeks extended.
Housebuilders always say it is "easier" - "quicker" - "they have all the searches in already" to try and justify to you why you should hand over control to a firm that favours the housebuilder and not the client paying for it.
Stick to your guns.
If the house builder cancels your reservation, they have to refund the reservation fee less "reasonable administration expenses"
Who is the housebuilder requiring this indemnity insurance?