Just to be clear, $500,000 is the maximum available under the NFIP for the building. If the building has an insurable value of $1.7M and the contents $200K, flood regs would require you to have $700K in insurance - $500K for building and $200K for contents. For your $1.6M loan, you may want to require an additional $900K in private flood insurance on the building. That's a credit risk exposure you need to address.
Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions