Bank as Beneficiary of Buildings Insurance

My mortgage provider wants me to provide buildings insurance with them as the named beneficiary. I understand this is the normal practice in Spain and if the house were to burn down the insurance money would be used to pay off the mortgage and anything left I would be able to use to rebuild the property.

I don't really understand how this works in practice as if I don't have the capital to rebuild the house and the money has gone to pay off the mortgage how do I rebuild the house? It doesn't seem to make sense to me, it seems I'm left without a proper insurance policy covering my risk.

Can anyone advise how this works in practice - do I need two buildings insurance policies, one for me, one for the bank? Or does the bank start a new mortgage and lends you the money to rebuild the house?