Entering a 1099-MISC and then entering a negative amount as "Other Income" works for non-taxable insurance claims, but it is important to enter the original 1099-MISC in the right place.

Click open Wages & Income 

Scroll down and if you have an entry in the Self-employment Income and expenses, you'll need to delete that

Scroll down below that section to "Other Common Income" and click Show more

Scroll down to Form 1099-MISC and click Start

This section allows you to enter a 1099-MISC and select that it was not earned as Self-employment income. 

Well I don’t know what to do now, I filed it thinking I entered it as I was suppose to and I figured that it just asked those questions normally. I also clicked that I had to file a 1099 because they sent us one so I thought well I have to file one. Turbo tax should ask if you are self employed, not expect you to know to go down and check a box. 

There seems to be a lot of confusion here, and I'm not sure how to advise you to correct it.  An alternative is to let the IRS sort it out. 

• You will get an IRS notice in about six to nine months that will be an inquiry about what you posted. 
• You will have the opportunity to respond. 
• I suggest that you Find a local IRS office, and explain the situation to them. 
• They will assist you with the formalities of the tax notice, and what you have to do.
• You can then contact us and correct what needs to be done.

Note:  Getting an IRS notice like this does not put you on a backlist.  These types of inquiries are procedural, and not criminal.  As long as you make the correction it will be put aside.

Does that mean they won’t issue my refund for that amount of time? 

If you e-filed your return, you will almost certainly receive whatever refund was showing on that return - the IRS won't start checking  (matching) the 1099-MISC information in your return to what was sent to them until later in the year.

 As @JohnB5677 stated above, 

• You MAY get an IRS notice in about six to nine months that will be an inquiry about what you posted. 
• You will have the opportunity to respond. 
• I suggest that you Find a local IRS office, and explain the situation to them (not likely to be easy) 
• They will assist you with the formalities of the tax notice, and what you have to do (also unlikely to be easy).
• You can then contact us and correct what needs to be done (much better!).