Yes, it is taxable. google involuntary conversion gain

First, the $2000 repair cost is not deductible because it came out of insurance payout, not from you.

Second, the $3000 left over from insurance payout is called "involuntary conversion gain", and you need to pay tax on it.

https://turbotax.intuit.com/tax-tips/home-ownership/what-are-the-tax-implications-of-involuntary-conversions/L0Fj7jDUZ