Typically, all income received for rental property from any source for any reason is treated as rental income and reported in the rental income section. This would include insurance payouts. How you deal with the situation after that, depends on your intentions of what you will do with that payout. Rebuild? Abandon? Sell "as is", or something else?
I'd also like to know if the structure was considered a "total loss" by the insurance company, as that can open up other options for how you treat the insurance payout.
To take note that in general, a rental dwelling insurance policy includes in it's coverage's anywhere from 6 to 12 months of "lost rents", usually maxed out at 85% of whatever the contracted rent was you were collecting prior to that. Therefore, the property remains "in service" because the insurance company is "in fact" paying you rent for the property for whatever period of time the "loss of rent" clause in your policy may cover.
