The Wikipedia camera templates are a great place to research where a specific model sits in the lineup and timeline for a camera system.
If you look at the Canon EOS digital cameras template:
You'll see a direct line from the 500D to the current 800D/T7i and 850D/T8i.
They are pushing for the cheapest EOS 3000D but if I'm not mistaken that's like 2 classes inferior?
Yes, the 3000D/4000D/T100 is two tiers below the XXXD line of cameras. But, your insurance company is probably thinking that given the age of the 500D, depreciation is a factor. A 500D/T1i on the used market these days in the US only goes for about $100-$200 (see MBP). So a new T100 may actually be more than your old camera was fairly worth.