You still don't get it. It is not like you cap the total possible damage and payout, but you value each and every item bellow its actual value. Even if the damage is bellow the insured sum the payout will be adjusted and pro rated.
See for example Art. 14 of the terms and condition of the Zurich content insurance. Note, first-loss is used for simple theft (see. Art. 401, 402 and 110.1.3 which is neither robbery nor burglary)
Zurich does not raise objection and adjustment based on underinsurance in case the claim is less than 10% of the insured sum or CHF 30k (whichever is smaller).
Great, that means I pay 100chf a year for almost nothing The only thing I would miss from a demolished apartment is personal data (documents, digital data). Sure, I have a digital backup stored out of my apartment but still it's not everything...
but then I would like to see a spreadsheet from anyone who claims his/hers insured items are worth hundreds of thousands, except if we are talking about art or rare collections. Oh man, these days things are so cheap!
I presume a lot of people use the calculators on the insurers' website, which probably assumes you have the most expensive in everything, so you're on the safe side when having to make an insurance claim (and subsequently, it pushes up the premium).