You are correct. Here is what I found on the IRS site:
The life insurance proceeds are taxable.
Because you surrendered a life insurance policy for cash, you must include in your income the proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. You should receive a Form 1099-R showing the total proceeds and the taxable portion. Report the total proceeds and the taxable portion of the proceeds on the Pensions and Annuities line of your tax return.
Hope this helps.
