Sold a property and owner financed. Is new owner under insured?

[John Hammond]

We just closed last week. There was a section in the mortgage that states that the owner will have a policy that covers the "full insurable value" and a lot of other legal jargon.  The gist of the paragraph is that he needs to have enough insurance, and if I'm not okay with it, I can pay the difference and add that onto his loan at the highest interest rate allowed by law.

A couple days after closing they sent over the evidence of insurance document and the policy is covered for 275K less than the amount I loaned him.  I have heard mortgage companies requiring the borrower to be insured up to the amount of the loan, but I don't know what this looks like in practice.

Is he under insured?  I'm new to owner financing and I may be misunderstanding insurance policies from a lender's standpoint.  I wanted to consult you guys before speaking with an attorney.  Any advice is greatly appreciated.  Thanks!