I assume you mean the insurance money was coded as other income as opposed to rental income income on the Form 1099-MISC. As such, the IRS will look for it on the other income line of your tax return, so if you report it that way, along with a negative income adjustment to cancel it out, it may cause less trouble for you in the long run. It's not technically correct, but your income tax will be correctly calculated.
You could leave the Form 1099-MISC entry your off of your return and reduce your repair expense by the amount listed there. If you do this, the IRS will likely inquire about it later on so you will have to explain what happened. So, it may be better to leave it like you have it now and enter a negative adjustment to income to cancel it out. Then, reduce you repair expense by the amount of the disbursement. Those are your options.
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the entry and the adjustment as a negative number
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