This should actually go on Schedule E as rental income, not schedule C. You were not engaged in providing a service or business, you were basically letting someone use your property to live (rent). No, there would not be an option for per diem expense.
To enter the income as rental income click start next to Rental Properties and Royalties, then walk through and answer all the questions. this will allow you to enter your income from the insurance company as well as expenses you incurred renting to your friend.
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