Every mortgage company requires that your home is insured for its full replacement cost. They need to make sure that if the home were a total loss that the insurance company will pay to rebuild the home that was lost. This protects the mortgage company from losses in the event that someone with inadequate insurance were to have their home burn to the ground.
The mortgage company will come up with a figure for what it will cost to rebuild a home. This figure accounts for things such as what materials were used in the home, its size, where it's located, and other factors.
Every insurance company also has a full replacement cost calculator that they will use to determine how much to insure a home for. This figure can sometimes be less than what the lender requires. They won't insure the home for less than what their calculator determines it would cost to rebuild the home.
The full replacement cost the insurance company comes up with and what the mortgage company comes up with can differ to a degree sometimes. However, most insurance companies offer what is called extended replacement cost and this is the case in Missouri. If you have this coverage the insurance company will cover a percentage of rebuilding your home beyond what they have for the full replacement cost. The percentage varies by insurance companies but is typically around 25%.
Most lenders will accept a lower full replacement cost on an insurance policy than what their calculations say the home is worth if the policy also has extended replacement cost on it which adequately covers their figure. This is the only way that a lender will accept an insurance policy with less full replacement cost than what they have calculated.