I realize this is a year old, but some of these answers contain incorrect information.
First, on the loss and insurance payment. The insurance payment is taxable if it exceeds the adjusted cost basis of the equipment, including depreciation. When you place equipment (assets) in service for a business, you are supposed to list them for depreciation. You might be able to depreciate the asset all at once, or it might be depreciated over time. The adjusted cost basis is the purchase price minus the depreciation you took or could have taken. If you have an asset that costs less than $2500, you can take it as an expense instead of depreciating it, and your adjusted cost basis is zero, because you fully deducted the purchase price.
When you receive an insurance payment for the asset, that is treated the same as if you sold the asset for the reimbursement, and that is how you report it in Turbotax. If you sell an item for more than the cost basis, you have taxable income called depreciation recapture. For example, suppose you have a $5000 camera you are depreciating over 5 years, and it is lost or stolen in year 2, after you have taken the first $1000 of depreciation. The adjusted cost basis is now $4000, if your insurance payment is $4500, you have $500 of taxable depreciation recapture. Furthermore, if your insurance payment is only $4000, you have a $500 deductible business loss.
Then, if you buy replacement items, that is handled as a completely separate transaction. You are adding a new asset to the business, and you can expense it under the $2500 safe harbor, or depreciate it, depending on your financial position and the needs of the business. Buying a new asset doesn't affect the income or loss calculation on the old asset, even if you use the insurance money to do it. It's just two separate things.
