How does mobile home insurance work?
Please include additional details on what exactly is meant by "insured for 65k". As written, this is currently ambiguous. Here are several possible scenarios.
Many mobile/manufactured home policies also cover personal belongings or personal liability. This is one reason the total insured value could exceed the value of the home. However, these coverages are separate from the home itself.
If the $65,000 refers to the value of the replacement cost coverage on the home, this usually means that if the home were destroyed, your claim would be based on the cost of a new home of like size, kind, material and quality, and not on the cost to provide you with a similar used home. In most cases I am familiar with, this benefit is only triggered in the event of a loss, and not if there is only damage that can be repaired. Also, please note that without this coverage, the replacement benefit that is paid would be reduced based on depreciation, which can be a significant amount.
In the scenario you mentioned, if the home is worth $20K and $20-25K of damage is done, the home would almost always be declared a total loss. Typically, what determines whether the $65K benefit is
paid does not depend on how much damage is done, it depends on whether or not you need to replace your home. That you have the extra coverage should not be a factor in whether the home is declared a loss. Again, please check your specific coverage as I am making several assumtions as noted above.
A useful summary of home replacement cost coverage can be found here.
Replacement cost coverage is also available on personal belongings, which is another reason why I'd need to know additional details about your coverage before we could say what would happen with certainty.
If you know of someone in this type of situation, it can really pay off to hire an independent claim adjuster. This means that you pay to get a professional opinion from someone who is not being paid by your insurance company and will work on your behalf to get a fair payment. You can find a national list of independent adjusters here. This is also a very good idea for anyone who has lost a single family home where a difference in opinion can mean tens of thousands of dollars.
I hope that helps! I'd be happy to respond in more detail if you can provide additional clarification on your coverage.