Yeah I would give her $10. I would let her know that the PO would have given you the $ you paid on the auction, not the retail price. They need to see proof of what was paid. Sounds like she was trying to be really helpful which is rare on ebay.
Actually, the shipping insurance is to cover the seller, not the buyer and therefore, the seller is supposed to make the claim, not the buyer. It is also the seller's responsibilty to, in the case of loss, reimburse the buyer - whether the buyer has paid for insurance and/or the seller has chosen to insure the item and/or has claimed on the insurance, yet and/or has received the insurance payment, yet, or not.
So really, as the seller, it actually makes sense, for domestic shipments, to insure the item for what one paid for it (assuming that's the higher amount); just in case one has to claim. This is, obviously, not the case with international shipments, though, as the insurance amount normally has to coincide with the customs declaration amount; so, if one insures the bag for retail, the poor buyer will probably end up having to pay tax on the retail price, rather than the eBay price and will, understandably, not be happy!