Is an endowment 65 policy an IRS qualified retirement plan? 
I am not sure why you have to remove the life insurance from your qualified plan . However , if you must there are several options available . You can take a taxable distribution in which income tax would be due on the fair market value of the policy minus the one year term costs . Another is to purchase the policy for its fair market value . You can exchange the policy inside the plan for one that is outside the plan . You can transfer the policy to an insurance trust or surrender the policy . 