All about ACC
Here’s everything you need to know about ACC and why you shouldn’t rely on ACC alone.
Historically known as the Accident Compensation Corporation, ACC is the reason New Zealand doesn’t have the option to sue when accidents occur – in contrast to the US. In this blog, we talk about what ACC is, the benefits of it and finally the shortfalls you need to consider.
What is ACC?
ACC is the acronym for the Accident Compensation Corporation which was set up here in New Zealand on April Fool’s Day 1974. It’s a system that allows people injured in New Zealand to be looked after quickly and efficiently within the public health service. It also allows for the family of someone that is accidentally killed to be looked after and removes the need to ‘sue’ as it is based on a ‘no-fault’ philosophy.
This is a great innovation: because if we are in an accident ACC come to the rescue. They will clean up the mess – whether it is a sprained back from an overly ambitious gym session that requires physiotherapy, or a car crash that needs roads repairs and medical interventions such as air ambulance, operations, rehab, medication and sick pay. ACC will come to the rescue. We all pay for ACC either through PAYE, or if we are self-employed, we will get an invoice at the end of the tax year. (Those who are self-employed should certainly consider Cover Plus Extra as an option.)
The advantages of ACC
Some of the main advantages of ACC are:
- Almost all treatment and rehabilitation costs relating to an accident are largely covered (there may be some surcharges).
- Weekly compensation is paid based on salary after two weeks until retirement age if necessary.
- A lump sum is available for permanent disabilities.
- There is a family support benefit after fatal injuries.
Where ACC misses the mark
There are some serious drawbacks though and these are regularly in the news. There are stories of old accidents not being covered as the injury is deemed to be progressive. Long court cases where sick people have to prove that their illness is linked to an accident. Payments being stopped as people are deemed fit to work. Consider these:
- Most long-term absences are due to illness (about 80%) so aren’t covered by ACC
- The maximum salary that can be claimed is 80% of earnings up to about $100,000 a year. Even if you earn $250,000 a year the maximum is limited.
- Any claim is capped at 80% of the pre-accident salary and the amount is taxable income.
- A claim is valid until you can return to any job, not the pre-disability job.
The workarounds – making sure you’re covered
If you are employed, take out the best insurance policy that you can afford which will protect your salary. Look for policies that are not ‘offset’ by ACC such as mortgage covers. You can make a claim with both ACC and your private cover in the event of an accident, and consequently, your loss of income won’t be as bad if there is any loss at all.
If you are self-employed you should consider Cover Plus Extra, which allows you to set the amount of cover, therefore, freeing you from the need to prove your income at claim time. This can be set at any reasonable level including a much lower level in order to keep your levy down. Proof of income is almost always a bone of contention for the self-employed. Often income can be erratic and the amount in the books doesn’t always reflect the amount earned. With the money saved on levies, you could then pay for private insurance that will pay out on both accident and illness. Cover that will pay out until you can return to your pre-disability job, not any old job. This private cover can also be used for business insurances such as debt protection and loss of revenue which ACC doesn’t protect
How can an adviser help?
There are drawbacks to be considered however as ACC does pay out a death benefit to the surviving family, but by reducing the cover this death benefit will also be reduced. Consequently, it is important to balance this when making any changes.
Like many insurance policies, ACC looks simple and straightforward on the surface. The headline proclaims a lot, but as is often the case with insurance, the small print takes away from the headline. Because of this, you should speak to an independent insurance adviser to make sure that you don’t put your family and yourself at a disadvantage.
Get in touch now to talk through your options by calling 0800 COVER YOURS or filling out the form below. No obligation – just straightforward advice. Based in Kapiti or Wellington (or are passing through)? Let’s meet face to face to talk through your options. That’s not an offer you’ll get from online providers!