Whether a lawsuit settlement payout is taxable depends on what the settlement represents. If this is a refund of previously paid insurance premiums, then it is nontaxable unless the amount was previously deducted on your tax return. The taxable amount would be entered in the Other Common Income section or Less Common Income, Miscellaneous Income.
The principle is the same for both Federal and State returns.
The other posters in this discussion from 3 years ago mentioned correctly that only if you deducted your premiums as medical expenses, in excess of the adjusted gross income limitation, or as self-employed insurance, or they were paid in full through a Health Savings Account, would a refund of the premium be taxable.
If the payout represented something else, such as punitive damages, then it would be taxable and you should have received a Form 1099-MISC. You would enter the information on the form in the Form 1099-MISC section of TurboTax and choose the option for lawsuit settlement when it appears.
See this IRS article for more information about the tax treatment of lawsuit settlements.
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