I don't see how you could get away with duplicating the coverage they already have. Yes, the property would be over-insured.
I'm going to catch flak for this, but the option of "calling the loan" just doesn't fly for some compliance officers at some banks. For us community folks, we'll never get management to "call a loan" because flood insurance is inadequate. At the end of the day, it's cheaper and easier to have the compliance department deal with the hassle of forcing a policy than initiating foreclosure proceedings.
With this idea in mind, I've had legal write up a very scary legal document that reiterates the customer's responsibilities.
Hope that helps.
;;prepares to take flak;;
Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.