ACC, do you love it or hate it? ACC… Probably out of all the invoices we receive, the ACC invoice may be one of the invoices we least like paying. Perhaps one of the reasons for this is that we do not perceive that we get a lot of value (or a lot of ‘product’) for paying it. Many of us probably only pay it because we have to. And what did we purchase when we paid that ACC invoice… Well, in a nutshell we purchased insurance. Specifically, two insurance products:
- Medical cover (pays your medical bills if injured)
- Income protection (replaces a portion of your income if injured and you are off work)
They are called ACC levy’s precisely because they are compulsory – if they were not compulsory they would be called premiums, because that is what they are – insurance premiums. It goes without saying that there is no cleverness in the ACC name – it does (some might argue that it doesn’t?) what it says on the tin: Accident Compensation Corporation. Medical Insurance, and Income Protection, for Accidents, and you have to buy it. And perhaps therein lies the rub for many – no one likes compulsory things, especially if we perceive very low value in it.
If you are injured (and they agree it is an injury) ACC will indeed pay for your medical care. And they will also replace a portion of your income if you are off work from your injury for more than a week. And if you are very very seriously injured, they will keep replacing a portion of your income until you are 65, on top of paying the medical bills on the injury.
It’s a strange thought but if you’re lucky and live a charmed life your spend on ACC will forever be a waste of money… i.e. you will never really be in great need of ACC’s services, because you never get seriously injured. On the other hand it could turn out to be extremely worthwhile spend should you get seriously injured (ACC receives on average 164,000 claims per month).
How does ACC decide when to send you an invoice? – after you file a tax return, the Inland revenue sends your earning details to ACC, and this triggers an invoice…
How does ACC decide how much to invoice you? – the size of your invoice is based on two things:
a/ how likely you are to be injured (i.e. how dangerous is your occupation), and
b/ how much ACC has to pay you to replace your lost income if you are off work from the injury
ACC charges you a certain amount per $100 of your earnings based on how likely you are to get injured – so an IT Consultant for instance will pay much less than a Builder, even if they earn exactly the same amount of money – because the builder is much more likely to get injured. And going into part b/ a Builder who earns $40,000pa will pay much less than a Builder who earns $80,000pa, because ACC would have to pay the lower earning Builder much less than they would the high earning Builder should he or she be off work from an injury.
Some good news for those who are Self Employed – ACC has an Income Protection product designed specifically for you and only available to Self Employed people. It is a far superior product to ACC’s standard Income Protection product, for instance it is an Agreed Value product, i.e. you tell ACC how much you want them to pay you when you are injured, not the other way around. Another big difference – on the standard product you need to prove a loss before you get any money! – on this optional product you do NOT have to prove a loss…! This optional product also allows you to take exact control of the size of your ACC invoice (AND the timing of the invoice too). Everybody who has this optional ACC product for Self Employed explained to them takes it. If you are Self Employed you should have this product explained to you – ACC is not a choice, so you may as well have the better product that has been designed for you.
This is a guest blog by Warren Devoy, for assistance with ACC contact us or feel free to contact Warren https://www.eliteinsure.co.nz/team/warren-devoy/