woman using laptop on the bedAs a self-employed person I pay ACC every year. And like you I hate it. But I also know it’s one of those facts of life – a bit like death and taxes, as the saying goes.

I’ve also been on the receiving end of ACC lately because my knee gave way during a tug-of-war (broken ACL, ripped MCL, chipped bone, bruising – small violins have been playing everywhere I go). They were really good at getting me scans and specialist appointments, and frankly I was impressed with the service. For me there was no loss of income so no need to go down that path, but I’m sure if I were a tradie or had a physical job then it would have meant a month off work. Which got me thinking.

Who replaces your income if you have an injury – does your private cover kick in, is it an ACC thing or a bit of both? You’ve probably heard some horror stories but the general rule is that ACC come to the party first, and if there’s a shortfall then your private cover kicks in as far as it can. For illnesses ACC won’t pay anything, but your private cover will.

Astute self-employed readers will spot an instant problem here – in the case of injuries you’re paying twice. Once in ACC levies and again in your income insurance premiums. Yes, you can do something about it.

Side note – you’re not actually paying twice because the bulk of income protection premiums in NZ are covering illness related risks. If ACC weren’t around and your private cover had to carry all the load for injuries as well then your premiums would be twice the size! Still, there is an element of overpaying and it can feel like a bit of a rip off.

Consider having some of your income coverage as mortgage cover. You’re still getting a disability product which is triggered by injury or illness, but the amount of cover is linked to your mortgage repayments rather than your pay packet. It’s an agreed amount with no tax to pay (that’s a benefit in itself), and if an injury keeps you from going to work then ACC will pay as well. Yes, you get both.

Now that might not be enough money coming into the household so you still need an element of income cover, and if that’s the case, you’ll still be paying twice for injury related claims.

Which is where Cover Plus Extra (CPX) from ACC comes in. CPX lets you reduce the cover you have with ACC and in return you’ll pay lower levies. You will still need your income cover here because that’s how the shortfall is picked up at claim time.

Overall this is not a recipe for reducing your insurance costs so don’t expect to save money.

What tends to happen is that any saving in ACC levies is used to buy better performing private insurance which gives you much better bang for your buck.

This is not for everyone of course (if you’re on PAYE and you’ve got this far I’m sorry for wasting your time!) and it shouldn’t be done without considered advice. But if you’re self-employed and want to see if it might work for you, please drop me a line on 0508 462 489.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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