How ACC and Income Protection Insurance Work Together
Navigating the landscape of income protection in New Zealand involves understanding the roles of both the Accident Compensation Corporation (ACC) and private income protection insurance. While ACC provides support for injury-related incidents, income protection insurance extends coverage to illnesses and offers additional financial security.
ACC: Support for Injuries
ACC is a government-run scheme that offers financial assistance to individuals who suffer injuries regardless of where or how the injury occurred. If you're unable to work due to an injury covered by ACC you may receive weekly compensation amounting to up to 80% of your pre-injury income, subject to certain limits. As of April 2025, the maximum weekly compensation is $2,350.62.
However, ACC's coverage is limited to injuries. It does not extend to illnesses meaning conditions like cancer, heart disease or mental health issues are not covered.
Income Protection Insurance: Broadening the Safety Net
Income protection insurance is a private policy that provides financial support if you're unable to work due to illness or injury. Unlike ACC it covers a wide range of health issues, including illnesses not resulting from accidents.
Typically, income protection insurance offers up to 75% of your regular income for a predetermined period, depending on the policy terms. This coverage ensures that you can maintain your lifestyle and meet financial obligations during periods when you're unable to earn an income.
How ACC and Income Protection Insurance Interact
When you have both ACC coverage and income protection insurance the two can work together to provide comprehensive support:
Injury-Related Incidents: If you're injured and ACC accepts your claim ACC will provide up to 80% of your income. Your income protection insurance may then top up the remaining 20%, depending on your policy terms.
Illness-Related Incidents: Since ACC doesn't cover illnesses your income protection insurance would be the sole provider of financial support in such cases.
It's important to note that income protection policies often include clauses that offset ACC payments. This means that if you're receiving compensation from ACC your income protection benefit may be reduced accordingly to prevent overcompensation.
Special Considerations for the Self-Employed
Self-employed individuals face unique challenges. ACC offers a product called CoverPlus Extra allowing self-employed people to agree on a set level of compensation in advance. This can be beneficial for those with fluctuating incomes. However, like standard ACC coverage, it doesn't extend to illnesses. Therefore, income protection insurance remains a crucial component for comprehensive coverage.
Ensuring Comprehensive Income Security
Relying solely on ACC may leave gaps in your financial safety net, especially concerning illnesses. By combining ACC coverage with income protection insurance you can ensure broader protection against both injuries and illnesses. Regularly reviewing your insurance policies and understanding how they interact with ACC can help you maintain optimal coverage tailored to your needs.
Understanding the interplay between ACC and income protection insurance is essential for safeguarding your income against unforeseen health issues. By leveraging both you can create a robust financial safety net that addresses a wide range of scenarios.