There is no link between value of the property, outstanding mortgage or any orther similar item and Insurance.
Insurance value required is simply the cost of rebuilding your property in the event of it been destroyed by an insured risk (of which there are 11 standard items including Fire, Flood etc)
You need to insure the rebuild value refered to in the policy as "Buildings" and the contents value refered to as "Contents". Contents value should be the cost of replacing all of your contents in the event of all been destroyed.
Check out [broken link removed] where you can input property sizes and areas and it will give you the MINIMUM you should insure for.