You have to indicate that the asset was removed from service in the business section of your return to stop the depreciation on it.
A casualty loss is intended to allow you to deduct a loss on a personal asset. The destruction of a business asset is allowed whether or not it came about from a casualty. So, you should remove the casualty loss that you entered and find the asset entry in the business section of your return and indicate that it was removed from service.
You will be asked to enter the sales amount (insurance proceeds) associated with the disposition, and the difference between that and the adjusted basis of the asset (cost less depreciation) will give you a deductible loss or taxable gain.
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