If the cash value payout exceeds the contributions (what was paid in) the excess would be considered taxable and should be reported. At this point, the insurance company would have issue a 1099-R form which you should report on your tax return.  They issue the form by Jan 31st... you may want to wait until mid February with the tax preparation. 

You don't have to report it, if there is no gain on the payout; not forms will be issued. 

If you are unsure, you may want to call the administrator and verify if 1099-R will be issued.