If you have a mortgage, the lender will probably require you to have homeowners insurance. The coverage amount only covers the cost to replace or rebuild the actual structure. They don’t insure the value of the land since it doesn’t burn.
If you have a $500,000 mortgage on a 2500 sf house, you might get a check for $250,000 to replace/rebuild the structure (2500 sf @ $100 psf). You would still be on the hook for mortgage.
