Cindy,

With insurance you always subtract the deductible from the loss.  In this question the insured loses their home which is valued at $125,000.  The loss is $125,000 so you subtract the $5000 deductible from the loss: $125,000 - $5000 = $120,000.  The insured should be paid $120,000 for their loss, but the limit on their policy is only $100,000 so they will only receive $100,000 against a $125,000 loss.

Debris removal is an additional coverage which means it is paid above the policy limit, so insurance will also pay the $7000 charge to remove debris.  The insured is paid $107,000 total for this loss.

Please let me know if you have other questions.

Jan