Borrower's loan amount is $245K. RCV is $840K. Borrower has private insurance for $250K.

The story on this is that the loan was refinanced from $391K to $254. When the loan amount was $391K, they purchased a policy for $250K as that is what we required. When they refinanced, they kept the same policy and it has since renewed. I have no idea if having extra insurance was a conscious decision on their part.

With a private policy is it acceptable for the borrower to have insurance in excess of the loan amount if not required by the bank?

All you care about is what you require them to maintain. As long as you only are requiring them to maintain $245K then anything else is between them and their insurance agent. If I had a house with a RCV of $840K and I was in a flood zone, I would have $840K of private flood insurance coverage. Trust me - living on Galveston Island, I have much more than the $250K NFIP limit.

Thanks Randy. Appreciate the response! Check that off my list!