No, you do not need to report or pay tax on the partial withdrawal of cash value from your life insurance policy.
Those funds would be considered a return of non-deductible premiums you paid in to the policy, partly for insurance coverage and partly as an investment.A policy withdrawal, on the other hand, is considered to be a partial surrender of the net cash value.
If, however, some portion of the cash payout included previously non-taxed interest income, then the payer would issue you a 1099-INT for that amount - that interest income would be taxable.
