Your agent is saying they could meet their obligation by, for example, replacing a $150,000 BMW 760 with a $20,000 Ford Fusion or a mansion in a ritzy neighborhood with a shack in the ghetto. I find that hard to believe. According to my State Farm agent, replacement means the exact same model or, if it's no longer available, the nearest match.
I can't speak for guns but we have had no arguments from State Farm on claims for automobiles and house damage. After a teenager ran a red light and totaled a fairly old car, State Farm asked me how much I wanted. I gave them a generous estimate of the price of a good one off a used car lot plus taxes. They paid up without complaint. (I suspect they were relieved not to be on the hook for medical bills.) Two years ago, a hail storm took out our roof. The State Farm adjuster added things like dinged gutters and outdoor light fixtures without being prompted. I don't remember if he hand wrote a check to serve as a down payment for our contractor or if one came via mail in a few days. They paid the balance promptly after the work was completed.
Don't know about cars but that's what he told me about guns, replacement was for fire damage theft was capped at $1500.
This is something everyone should discuss with his insurance agent to make sure he has the coverage he wants. My wife's jewelry and musical instruments are not covered by our homeowner's policy. For them, our agent sold us a separate "personal articles" policy that provides for repair or replacement with like kind up to their appraised value regardless of the cause.
