dumb question.

building and contents secure a $2 million loan.
building has over a $500,000 value
contents has over a $500,000

we need $1,000,000 of coverage - half on the building and half on the contents.

I don't see a question, but your statement is correct.

I also agree. However, this is the minimum you can required (the maximum offered by the NFIP). You can always require more (private) flood insurance.