Because you're far more likely to be carrying far more stuff with you on holiday than day to day. Carrying one camera and one lens around your local town you know is very different to carrying all your lenses and one camera to a strange city. The same with a weeks worth of clothing and other equipment - many policies wouldn't actually cover everything in your hold luggage if it wasn't just a weeks worth of clothing from Primark.
You wouldn't argue for underinsuring on your home contents insurance would you? So why argue for underinsuring on travel insurance.
That said, as much as its a positive to fully insure for luggage and equipment when you are away, the cost could be astronomical so that's one of the reasons many don't.
The biggest worry for me is that many people take out those cheap travel insurances and end up way underinsuring themselves on the medical side of things. Now there's a potential for some serious wonga losses.
Op, for photography equipment you should be able to find cover with a photography specific insurance, if, as already mentioned it isn't already covered under your home insurance.