So it's reported as income rather than a negative expense.
Yes. When you originally paid the insurance (which was most likely paid from escrow by the mortgage holder) you claimed that amount as an expense. For example, you paid $1000 for the insurance.
Later, the insurance company refunded you say, $200 for example. But instead of sending that refund back to the escrow account, they sent it directly to you. Therefore, you report it as rental income of $200 in addition to all the other rental income received from the tenant.
