How do I find out if my mother in law was taken advantage of?

Yellow, did you see the life insurance policy or was this something your Mom-in-law had told you and hubby about?

If it was something your Mom-in-law told you, please note that with dementia there are chances of not getting ones fact correct.

She probably hid it and forgot where she put it. Who has her DPOA?

She may have hid it. Under a mattress, in the pocket of a coat, the oven.
You'd surprised. Did she own a house, have a car. Usually people stick with one insurance company for car, house and life policies.

Look at her bank statements and find out who she has been paying her premiums to.

I don't know how someone could have taken it, it would not be paid out until she dies. If she changed beneficiary and she has been diagnosed with dementia you could challenge it or just change it back.

Most insurance companies have a form that they want signed to speak with anyone besides the policy holder. Once you identify the who, call and ask how you speak with them and get that done. I don't think I needed to have my dads notarized, but I wasn't doing anything but paying his bill.