almost every type of insurance can be "maxed out". You buy a policy with a particular amount of coverage based on your perceived need. The insurance company charges you less for a lower cap, but if you put the cap too low, it won't cover everything you lost. So choose a policy with enough coverage.
To protect the value of the house and stuff as evaluated at the time where you make the insurance deal (and calculate the premium), not at the time when the fire happens - generally, there wouldn't be any significant difference, so it's not a problem and doesn't make the fire insurance any less valuable.
In a small fire it makes sense to look at what exactly was damaged and evaluate the loss, but if a house and all the belongings need to be replaced, then you can calculate that value beforehand, and put that as a reasonable limit to be used for the insurance; I believe you'd agree that if you add a million dollar painting to a half-million dollar house then that would need an adjustment to the insurance policy if you want it to be covered.
To insure what you truly can't afford to lose.
i.e. you definitely need the money to rebuild your house/kitchen/etc., you don't really need the replacement tv.