It is possible to transfer the cash value in a life insurance policy to another policy tax-free. I suggest speaking with your insurance agent to see if the process for a Section 1035 exchange was followed. You may wish to review this article as well. http://www.morningstar.com/advisor/t/75866242/know-the-rules-governing-tax-free-exchanges-of-insuran...
Otherwise, you have taxable income to the extent the proceeds from the policy exceed your investment in the policy.
