What will ACC pay for is a very popular question and we need to understand what it will pay for and even more importantly, what it will not pay for. There are limits to this cover and as obvious as it sounds, it is for Accident Only.
Accident Only Income Replacement
We have to acknowledge the place ACC plays in our lives as New Zealanders and how fortunate we are compared to other countries such as the United States. However it is restricted to Accident Only and does not pay for being unable to work when you are too sick to work or contract a serious illness that prevents you from ever working in your current occupation again, therefore making accident only cover irrelevant.
Accident Only Death Cover
In addition to replacing income, if the income earner became deceased and was earning an income when they died, the spouse and surviving dependents may be able to get compensation for the loss of their income to support the family. ACC pay up to 80% of the deceased’s earnings if there are any children and other dependants.
If the child or dependant is under 16, the money will go to their parent or caregiver but any Your New Zealand superannuation may affect the payments to the caregiver. ACC will also pay up to five years from the date payments started or until the youngest child of the deceased in your care turns 18.
They will even help pay for a funeral up to $6,471 as at 31st August 2021
Salary and Wage Earners
In short, ACC may replace up to 80% of your salary or wage if you are unable to work due to an accident. Being a salary or wage earner makes your income easily to be assessed because your ACC levies are paid to ACC based on your income.
Being self employed can be a bit of a mine field around how much you are insured for what will ACC pay in the event you are disabled by accident. How much you get will depend on how you have set up your ACC when you became self employed.
When you first become self employed you are normally assessed on a minimum assessable income of $38,616 because that is the minimum levy charged. Check out ACC Cover Plus Calculator at https://www.levycalculators.acc.co.nz/
However, if you are earning more than that, you will need to manually change this with ACC and you can both “agree” on an amount and they will charge you a higher ACC levy, but you will also be covered for more. This is called ACC Cover Plus Extra but you are not put on this automatically, you need to manually request a change to their Cover Plus Extra cover.
Remember though, that you are still only covered for accident and not any inability to work due to an illness, so the question is not what will ACC pay for, but more so, what ACC will not pay for.
What will Private Insurance pay for?
Private insurance is much more comprehensive and will pay for Accident or Sickness so it presents a question, should you have both ACC and Private Cover or rely on ACC only? You need to understand what ACC will pay for and then you can make an informed decision on whether you need private cover for everything else.
Important Points to Know
- A private insurer will not pay you 80% of your income on top of any ACC Payments, it will make up any shortfalls that ACC may pay, up to your insured mount. So in the case of an accident ACC should pay and the private insure will pay the difference.
- If you are on a long term ACC claim and you get moved to a sickness benefit (for what ever reason) you may be able to then get your private insurer to start paying you your insured amount, less any government payments being made to you.
- For higher income earners, the maximum assessable earnings by ACC as at 1st July 2020 is $130,911 so for higher income earners, you seriously need to consider insuring any income shortfalls the ACC system has.
- There are ways to make personal Income Cover affordable such as how long you are prepared to wait before you get a replacement income and how long would you like your income replaced for? these are major factors to what a private insurer may charge you as a monthly premium.
If you would like to chat about the differences of ACC and Private Income Cover, please contacts us.