Hey, not trying to devalue this bike - I'm saying it doesn't have a lot of value to begin with. I should know - I bought one, then sold it - twice - over the course of 5 years. Virtually NOS, black/chrome with red decals, same vintage, all original down to the tires and red cable housings. Bought on Ebay for approximately $160, shipped. Three years later, I sold it on Ebay for about $300, shipped, to a buyer in Japan, but shipped to a CA address. Damage in shipment meant it came back and I had to refund. Small dent in the top tube and missing brake caliper hardware. Finally found the hardware, left the dent, and sold the complete - and now only 99% original - for $125 at an old friend's garage sale around 2010.
They just aren't anywhere near a Paramount in terms of parts, performance, original cost, etc. Just because one throws $1000 at a bike doesn't magically make it $1000 more valuable.
OP: Having said all that, and my first post as well: in this case, it would seem more likely the insurance company would simply consider the cost of an equivalent modern replacement, and might well settle for that. Could net at or above $1200; if they haven't thought about that as an option, maybe you should broach the subject.
DD