Home owner's insurance question

If you 'under-insure' you will be in trouble if you have a catastrophe.Mentioning this to person who wanted to not insure media.
Say you want to cover only some of your possessions... Your total worth $100,000 and you only insure for $50K. Well if you lose everything.. They will NOT hand you $50K, because you were under-insured. You will get $25K Period.  Those are the insurance companies rules everywhere USA anyway.   
For the person with $5K insurance... for the stereo? or all? You need different insurance. What the contract as written is WHAT YOU GET. Period.    
To have the real cost of the stereo covered may not cost more, but it has to say in the contract what is covered at what amount up to. if an exclusion says stereo only up to $5K then that is it. 

Glad to see other insurance professionals here. All very good advice. I’ll just add a few things.

1. LP’s if considered “collectible LP’s (an intrinsic value that appreciates) can be insured separately under a Personal Articles Floater, as can be jewelry, other collectibles, camera, artwork and more. This type of policy is “all-risk” vs named peril; even dropping a LP would be covered.
2. A cash settlement will include depreciation but replacing the item ( if you have replacement cost coverage on your personal property, most people do) you will get you full retail value.
3. AV gear does not normally appreciate in value so it typically cannot be insured for all-risk coverage.
4. The value of an educated insurance agent with a qualified staff cannot be said enough. Dealing with unlicensed people in a call center, well “ you get what you pay for”! That statement also applies to auto insurance. My agency insures people weekly with the wrong type of insurance.

Dave

@mrdron If by "capped" you mean your overall policy limit, that doesn't sound right. You get to choose the policy limit because you know what you own and you are paying the premium. If your insurer won't increase your limits at your request move on. Kudos on having Renters Insurance, many renters don't bother getting it.

@philharmonicpete    Yes, it is legal jargon saying you have 180 days after the ACV payment to collect the rest up to the actual amount spent to replace the item. In some situations, insurers will grant an extension if  requested. 

@ricmci  There is no limit on audio equipment other than the policy limit. However, there may be a dollar limit on "Media". You will have to check your policy under the heading "Limits on Certain Property" or "Property We Do Not Cover" or contact your insurance company.

Finally, Insurance companies are highly regulated by the individual states and coverage/limitations, etc. can vary from state to state.    

Elizabeth is spot on with the under-insured issue. Also the insurance companies like to be aware of any MATERIAL" issue that exists - and £100k of hi fi stuff is indeed material.  A wise assessor can decimate your claim if they feel inclined. I declare my values (over £100k) and list them as far as I can (apart from the fact the list changes regularly)

This all sounds like a potential nightmare.  Let me set up a possible scenario.  You have a home owners's policy with a $200,000 limit of liability with replacement coverage for personal property.  Your home has a fire and you have a total loss of your $150,000 stereo system.  You make a claim with your insurance company for that $150,000.  You do not have any money to re-buy your system.  What are you going to get paid by the insurance company?  Are they going to replace your system even though you have no money to do that yourself?