It is best to insure your home for its full replacement cost.  Homeowners insurance policies contain a co-insurance clause that identifies the minimum coverage requirement.  Choosing a dwelling limit below the co-insurance requirement (often 80% of the structure's replacement cost) is risky.

Verifying adequate coverage according to policy conitions is part of the claim investigation process.  The adjuster will compare the full replacement cost of the home to the policy's dwelling limit.  

An inadequate coverage limit reduces the claim settlement by the percent of underinsurance.  As a result, you may have to pay out-of-pocket or borrow money to rebuild or repair damage.

Avoid an unwelcome coverage surprise by conducting an annual policy review and dwelling limit check.  Confirm your policy's insure-to-value requirement, the penalty for underinsuring, and ask about broadening coverage.