Sarah,

The property in this question was a total loss which means the insured lost $125,000.  So $125,000 is payable minus the $5000 deductible.  However, the insured only has $100,000 in coverage.  Instead of collecting $120,000 the insured will collect $100,000 plus they can recover the $7000 for debris removal because debris removal is paid "in addition to" the policy limit.

I hope this helps.  Let me know if you have other questions.

Jan