The proceeds of an accident and health policy, are not
reportable as income so long as you did not deduct the premiums, and so long as
this is not an employer provided fringe benefit.
If you pay your
premiums under a flexible benefits plan with pre-tax dollars, or if your
employer pays part or all of your premiums, some of the benefits you receive
may be taxable. If both you and your employer have paid the premiums for
the plan, only the amount you receive for your disability that is due to your
employer’s payments is reported as income.