No, it’s not your wagon, it’s you and your ability to earn an income.
Here are some facts:
- 4 out of 10 Kiwi men will be off work for at least 6 months at sometime in their life[1]
- 90% of disability is due to illness not accident[2]
- ACC only covers accident, not illness
If the only cover you have is through compulsory ACC levies, you’re putting yourself and your family at financial risk if you’re unable to work as a result of illness.
Ministry of Health data shows that:
- For 25-44 year old males, 25% of health loss will be from mental disorders, such as anxiety or depression (compared to 15% from injury)[3]
- For 45-64 year olds, 24% of health loss will be from cancer and 16% from vascular disorders (eg. heart disease and stroke), with injury representing less than 10%[4]
All this means ACC just doesn’t cut it when it comes to covering the problems that are most likely to keep you off work.
The solution is simple and inexpensive
If you’re self employed and already paying ACC levies the good news is that it’s simple and inexpensive to broaden your cover to include illness.
That solution is switching ACC Cover Plus Extra, in combination with private loss of earnings (income protection) insurance.
A typical example
Mike, a 40 year old builder earning $80,000, is paying around $67 per week in ACC levies and would receive $1,230 per week in compensation if he’s off work through accidental injury.
If Mike optimised his ACC with Cover Plus Extra and private loss of earnings insurance, he would be covered for accident and illness for between $1,150 and $1,270 per week (depending on the reason for the claim). He would pay around $66 per week for cover that would last for 5 years, or $86 per week for cover that would last until age 65. Given that 91% of claimants are back to work within 5 years, depending on how old you are, the 5 year benefit option works for most people.
If someone else pays your ACC levies don’t worry. You can still arrange loss of earnings insurance to guarantee your income if you’re off work through illness.
To work out what’s best for you and your family I recommend speaking to a financial adviser who specialises in this area. They will talk with you about your individual circumstances and recommend a solution that best meets your needs.
In a nutshell
If the only protection you have from loss of income is ACC you could be substantially at risk from disability through illness.
The right package won’t cost you much more than what you’re already paying in levies and will substantially broaden the protection you have.
It might not seem like the biggest priority right now, but for yours and your family’s peace of mind it’s worth getting sorted now.
The information contained in this article is general in nature and not intended to be personal advice.
Illness, Income Protection & ACC Dial Down
[1] Tower Risk study
[2] Council for Disability Awareness, Long-Term Disability Claim Review 2014
[3] NZ Burden of Diseases, Injuries & Risk Factors Study 2006-2016, Ministry of Health
[4] NZ Burden of Diseases, Injuries & Risk Factors Study 2006-2016, Ministry of Health
[5] With a 5 year benefit period. $86 per week for benefit period until 65 years old.