Hi Amy,
As you're in the UK, you have to comply with the EU Distance Selling Regulations, and unfortunately the '3 days to notify' and not refunding if it's for a wedding is not compliant. I appreciate you are trying to take steps to protect your business but your policies need to be within the law.
Customers in the EU can change their mind and request a refund up to 14 days after receipt of an item, they do not even have to give a reason. As long as the item is unused (great idea to add a tag on as others have suggested) you have to refund them once you have received the item back or received proof of posting if it goes missing in the post on return. The only exception to this is custom orders where the seller has customised an item at the specific request of the customer and it is not re-sellable to anyone else (e.g personalised).
Also, the seller is responsible for the item if it gets damaged or goes missing in the post, not the buyer. So there is no need for the buyer to pay for extra insurance or tracked services as you would have to deal with a Royal Mail claim if it went missing or got damaged, and the customer would be entitled to a replacement or a refund.
Here's a useful thread with a link to an article about the Distance Selling Regs that were updated in July this year:
https://www.etsy.com/teams/7332/etsys-uk-ireland-seller-support-team/discuss/13736732/Hope it helps.