Final answer:
No, benefits received from a disability or health insurance policy are not excludable if the taxpayer pays the premiums.
Step-by-step explanation:
No, if the taxpayer pays the premiums for a disability or health insurance policy, benefits received thereunder are not excludable even if they are substitute for income. According to the law, income from the insurance benefits is generally taxable unless otherwise specified. The exclusion only applies when the premiums are paid by the employer.