We surrendered an insurance policy for one of our kids - do we need to claim the amount as income

[Carl]

No. You paid for that insurance policy with after tax dollars over the years. That policy is considered a "product" that you bought and paid for with dollars you already paid taxes on. When you cashed it in, there is no way that you cashed out for more dollars than you paid in. So there's no taxable gain there.

Now there are some types of whole life policies (the worst kind to buy) that accrue interest or dividends. If you cashed in this type of policy, then the insurance company will send you a 1099-R reporting only the taxable amount of your interest or dividends paid as part of the payout. That "is" taxable. SO if you get no tax reporting document concerning this policy, you have nothing to report.