If you have uploaded an image that is too small for the template you will be alerted when you try to complete step 2 of the upload process.
You will be able to use a size template smaller than the default size.
However, if you wish to use the larger image size, you will need to add a new image that is at least as big as the pixel dimensions specified with the larger image size (by default this largest image size will be 900 by 900 pixels).