For a surrendered Life insurance policy Turbotax is picking up the gross distribution instead of just the taxable amount and adding it to earnings. Is this correct?

If you mean the gross amount is showing in the Income Summary, that's correct.  It's all part of your income, it's just not all part of your taxable income.

If you want to see what's being added to your taxable income, click on Forms on the upper right, the click on the 1040 on the left.  If that seems wrong, then click on the relevant 1099-R worksheet to double check your entries.