Having bought a house last year, I can say that (at least over here) the insurance for the house is primarily for the bank providing your mortgage loan and not for you. The insured value of your house is there to pay back your loan if you can't do that anymore (and chances are you can't if it burns down because you have to pay for rebuilding it), so the bank demands that it's insured it so that it can be rebuilt if it's damaged beyond repair, protecting their investment. Actually the insurance or loan contracts probably prohibit you from doing anything other than rebuilding your house with the insurance money.
The same goes for the life insurance you are required to have when you take a mortgage loan. (Technically, it's not a mortgage. It's a loan backed by a mortgage -> you get the money in exchange for giving the bank information and/or decision rights (the mortgage) when you use or sell the property. The bank doesn't own your house, but you do give them the right to sell it if you can't pay off the loan; they aren't fond of doing that though, because having to sell it is a huge cost and possibly risk to them too.)