What does iPhone Product replaced mean?

When apple service providers say the iPhone has hardware issues and is replaced, does it mean the product is replaced completely? Later I was told for hardware issues as per Apple guidelines the screen from the old phone is taken stuck on a new body and sent back. My issue is the screen of my phone wasn't scratched and the replacement phone has a scratch on it! Now they are offering me some warranty for the screen if it becomes unresponsive, turns black, less bright, etc. Why should I accept this from apple after paying premium prices for the product?