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UPS Damage Claim/Do I need to give up item damaged?

Filing a claim w/ UPS is like pulling teeth! Almost 3 months have passed and since the package was shipped by Staples that compounds the problem. They all say the claim has been approved FINALLY!
The item was insured for $500 but actually it could be worth $2000 to $4000. I couldn't afford to insure the item for the real amount so I decided on $500.
Now UPS wants the item but I do not want to give it up at least not until I've been paid the damages. By law, do I have to give up the item? It's my item and I wanted it here with me. UPS destroyed it, but I have to relinquish it? That's ridiculous! I would like to know my rights. If I can repair the item and move it I would.
I just want to do the right thing here. Please comment.
Thank you for the help.

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