What are the tax consequences for this type of policy?
The answer depends on the source and nature of the funds used to pay the insurance premiums. If you paid for the premiums with after-tax dollars, then you should receive the disability benefits tax-free. If you paid for the premiums with pre-tax dollars, then the benefits are generally taxable to you, as are benefits paid for by your employer. You should consult with your tax advisor about tax treatment of any disability insurance that you have and/or are considering purchasing.