I am five years in working as an adviser with Velocity now, and only a handful of my clients have needed to claim on their risk insurance.

Overall, I think (touch wood) our statistics are amazing, given the diverse range of mahi our clients engage in.

Clients who have gone on claim have done so for a mix of sickness-related issues (i.e., they’re calling in the disability (income / mortgage protection cover, or had a serious event, such as a heart attack or cancer and claimed a trauma lump sum) or, they’ve had accidents and injuries (and needed physio, rehabilitation therapy, sports injury and on it goes. )

Thankfully, in NZ, we have ACC. Once we start earning an income, we all pay for ACC cover through an ACC levy.

ACC is the biggest insurer in New Zealand. It is insurance that works in our time of need. ACC will cover your medical bills and provide an income stream for loss of income during an accident-related injury.

However, They will not cover you for anything else.

(Fun fact: They also exist to stop the government from being sued. )

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ACC Levies

How much ACC levy do you pay? On PAYE, you may not even notice the levy on your payslip. Currently the flat fee is $1.27 per $100 (excluding GST) of your liable income. The Worker/Employer levy is between $0.04 to $6.43 per $100.

‍Pop quiz - Which industry/job do you think pays the $6.43? And who pays $0.04c?

‍What about the self-employed?

If you’re self-employed, the picture is not as simple and not as pretty.

Your levy payable to ACC is based on your returns, and the type of job you do. This is in addition to GST, income tax and any student loan payments.

When it comes to claim time, if you’re on the ‘default’ Cover Plus (CP) product, you can receive up to 80% of your previous 12 months' income, after a 7 day wait.

Which is good, if it’s been a terrific year and you've been able to pay yourself decent wage..

On the default CP cover, if you’re self-employed, you’ll need to jump through a couple of hoops (like proving a loss of earnings) at claim time. (Note, you will be doing this paperwork when you are broken...)

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It is important to note, If you have passive income that will continue coming in after you are on claim (on CP), that income will be offset.... against any ACC payments.

Run those numbers in your head for a minute...

If that thought just made the hair on your neck stand on end, you are most likely a self-employed person, a Shareholder, a Director, or essentially a non-PAYE Kiwi.

You may not have heard of any option other than (CP) Cover Plus. It's a good thing there are other options, and for exactly that terrifying scenario you just thought of...

Get Smart: Better options for the self-employed

There is an option available through ACC that pays an agreed value, that is, agreed up front. The option is Cover Plus Extra (CPX).  This option gives you 100% of that agreed amount after seven days, even if your business continues to generate income after claim time. CPX means you don’t have to prove a loss of earnings (that would otherwise be offset under the standard Cover Plus product). Furthermore, CPX provides an agreed payment that remains at 100%, even if you go back to work part time.  

Even better, you can reduce your ACC (agreed level) cover, and therefore your ACC levy, and use those remaining funds towards insurance that provide better coverage - like business key person risk, life cover, mortgage and income protection cover, share purchase cover, group health cover and so on.

Less than 15% of people are in hospital because of an accident. You’re more likely to get sick and if that was to happen, ACC are not funding you.

If you are self-employed, find some time to talk CPX with an adviser. It’ll 100% be worth your time.  

By the way, the $0.04 is Accountants and the $6.43 worker / employer levy is professional sports Kiwi’s (horse jockeys, rugby players etc).

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Simon

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About Simon

Hi, I’m Simon a Financial Adviser here at Velocity Financial. I enjoy working with my clients to help demystify all the Mortgage, Insurance and KiwiSaver fine print, and help get them to where they want to be. I am dedicated, thorough and offer professional advice that works for you. I like to help people on their journey and be a trusted person to guide them through really important events in their lives such as the home buying process. I help my clients collaborate with valuers, builders, lawyers and real estate agents to ensure a seamless experience. That satisfaction of reaching the goal with the least amount of stress for my clients is hugely rewarding. I navigate unique scenarios and tailor lending solutions for individual circumstances to save money and time. As a proud father of two and avid supporter of all my children’s endeavours, I know just how precious that time is. On the weekends you’ll also find me mountain biking, surfing, or checking out NZ’s great walks.

Disclaimer: Simon O’Neill (FSP534466) is a Financial Adviser with Velocity Financial(FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Simon’s disclosure statement on our website.

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