ACC: it’s the pride of New Zealand business and the envy of many governments and workforces all around the world. We’re very lucky to have it—but it does have some significant flaws when it comes to actually protecting you.
The ACC cover leaves a lot to be desired, and these are just a few of the reasons why:
Self-employment
The ACC is designed to cover everyone, regardless of if they are a regular employee or self-employed.
However, the big difference in the eyes of ACC between these two groups is that the first has a regular paycheck that is easily calculated and compensated, while self-employed people have a far more variable financial situation.
Regardless of which group you fall into, ACC will pay up to 80 per cent of your taxable income, based on the most recently completed financial year. If you’re a tradesperson, for example, you might have brought in $90,000 in one particularly busy year, but only $70,000 in another.
If you got injured in the $70,000 year instead of the $90,000 year, you would receive $16,000 less from ACC.
There’s also the question of what kind of cover you get as a self-employed person. ACC has CoverPlus Extra, which allows you to choose how much of your income is covered if you’ve had an accident and can’t work.
That’s a great way to deal with the variability, but it can also result in you paying far more than you actually need to, such as paying for $90,000 a year and then actually making $70,000 a year for several years afterwards.
Accident, not illness
There’s a good reason why it’s called the Accident Compensation Corporation.
- If you get sick, rather than injured, it can’t cover you.
- If you get injured, but outside of the workplace, it can’t cover you.
- If you are injured in the workplace as the result of a pre-existing or degenerative condition, it can’t cover you.
There’s a whole raft of different scenarios that ACC income protection can’t cover you for, and the government’s universal sickness benefit isn’t enough for. If you’re the main earner in your household, a serious illness could be enough to take you out of the workforce for six months—and ACC won’t be able to help you.
Payments stop once you can work (nearly) any job, not just yours
Once you have recovered—if you recover—from your injury, the ACC will expect you to return to work and will stop or reduce payments, depending on if you can return full time or part time.
A reasonable expectation, with one big catch.
It isn’t just your previous role that the ACC expects you to return to; it’s any role that you are reasonably qualified to do.
You might be working as a high-end IT developer earning six figures a year, when suddenly you lean a little too far back in your chair, slip, and smack your head on something sharp. Afterwards, it’s found you have trouble remembering things and some slight motor function difficulty. You are unable to do your job as a result, and take a few months off for rehabilitation.
After your treatments, you feel a little better, your functions start returning and you can return to work. You still can’t work as a high-end IT developer yet, but you can work as, say, technical support.
Despite the fact this new role would only earn you half of what you were earning before, the ACC may require you to take that position and halt payments.
You’re earning less, and now you don’t have the 80 per cent of your previous income appearing from the ACC either.
In addition, if you were unable to find a job that you were qualified to do, you may end up needing to go on the benefit as well.
What’s the answer?
The ACC is great, but it's ability to cover lost income leaves a lot to be desired.
That’s why many people choose to go with third-party income protection instead. It protects you for a pre-defined amount, regardless of accident or illness, and doesn’t try to force you back into the workplace before you are ready.
If you’re serious about providing security for you and your family, it’s best not to rely completely on ACC.
For more information on income protection insurance and how it can help you, download our free ebook below.
