I believe the number one mistake people make when buying insurance is insuring too low. When discussing limits of coverage with an insurance company representative he confirmed for me that is their experience as well.
One example is a barn fire, the cost to clean it up so they could rebuild equaled to 10% of the total rebuilding cost. On a $1,000,000 barn that is $100,000. I do not know if they allowed for that amount when choosing the dollar amount of coverage.
Another example is a farm workshop. After the fire, the estimates to rebuild this particular shop came in at $45 per square foot including the cost to clean up the debris. I wonder if they had enough insurance.
I was also told about a single detached car garage that was insured for half of its cost to rebuild and another situation where there was an un-insulated workshop that received a total makeover including insulation, heating system and wiring, new insulated overhead door, etc. In this situation the owner did not notify his insurance broker of these upgrades, so when the fire destroyed it he was out the difference.
Often the tools and repair supplies in these shops are not insured to the adequate amount. After a fire you are required to write up a list of the contents, this list can very often add up to being more than policy limit.
Be sure to seek advice and purchase insurance from those who understand your business!