1. What state is this in?
2. How much is the policy worth?
3. Who was the executor of the estate?
All of the life insurance never should have gone through probate to begin with, unless the estate had been named the beneficiary or no beneficiaires were named at all. Life insurance is considered an asset that is NOT subject to be probated, but maybe the attorneys didn't know that or pretended not to know it so they could collect a larger executor fee. The money was supposed to be paid directly to whoever she named as beneficiaries.
You should first find out from the insurance company who she specifically named as beneficiary/beneficiaries---those are the people to whom the money will be paid.
Before you consider calling the police to report the theft, don't do it unless you intend to file charges. You may end up looking foolish if the looter has a power of attorney form (signed by the decedent) that authorized the looter to handler her finances (but the power of attorney does expire on the day of the decedent's death). If the looter took this money out after (AND NOT BEFORE) the death occurred, then you need to find out if your county probate court required an executor's bond to be paid for in this probate case, since any stolen monies might be able to be recovered by filing a claim with the bonding insurance co.
If the looter IS named as a beneficiary, it would be the ethical thing to go ahead and let that person collect their check. The insurance company is going to report the amount of the check to the IRS for tax purposes, and there is no way you can keep it secret, since he/she will eventually find out about it from the Form 1099.
If the looter is NOT named, then you all should keep the entire life insurance matter a secret among yourselves.
DANDY DON