New Zealand has an accident compensation program called ACC, which stands for Accident Compensation Corporation.
However, it is not uncommon to be unaware of the ACC’s mandate. It is common to assume that an accident will only result in my disability. This leaves kiwis vulnerable to financial hardships when they are disabled.
ACC was created to address the financial needs of victims in an accident situation. It also removes the litigious element of an individual’s rehabilitation. ACC is unique in that the victim of an accident must pay their own costs and seek to recover them from the responsible parties.
James, for example, was walking along his home’s path when he stumbled on an uneven step. This fractured his ankle and required surgery. The cost of his hospital stay, rehabilitation, and 80% of his income during his absence from work were covered by ACC. He would have to pay his own expenses if he were the property owner elsewhere.
You may have thought that ACC would protect you in the event of an accident, as many others. Statistics show that 60% of disability claims stem from events other than accidents.
While time off is common for cancer treatment and heart attack recovery, income protection claims are not covered by ACC. People can become depressed and anxious after the death of a family member or major life event.
Secondary conditions can develop even in the event of an accident. Depression and mental health are the most common conditions. ACC will cover your injuries while you heal, but ACC will not cover you if you have depression after the accident. ACC will usually turn off the water on you if your original injury has healed. Your income protection will pick up the pieces. Major head trauma is the exception. It is very difficult to recover from.
Why do you need additional income protection
ACC will pay up to 80% of the income you earn from taxable sources if you are injured and cannot work. The maximum amount is $96,000 annually. This is considered taxable income.
If your income exceeds $96,000, then the scheme will not replace your income. You need to look into additional income protection options.
ACC is a good option if you are recovering from a temporary injury or need to return to work quickly. They replace your income within 7 days.
But what if that isn’t true? ACC is focused on helping you get back to work, even if it means a new job or occupation. This is not the ideal situation for many.
Philip was a barrister. He sustained a head injury that prevented him from being able to practice law. He could have found another job that didn’t require the same level of mental performance, and at a lower salary than ACC would have helped him transition into. He had income protection so he can live with his injuries with the income he had before his injury. He has the freedom to choose what he can do. With the time that he has, he chooses to give back.
If you have an injury that has not healed, but can’t return to work because of another injury, ACC will transition you to a sickness benefit. This is usually a substantial drop in your income.
Income protection, on the other side, is about protecting you for your occupation.
Income protection is available to help you if you are permanently disabled or are unable to return to your previous occupation.
The insurance company, like ACC, would still want you to return to your occupation because it would be the best for most people.
ACC does not usually cover ‘degenerative conditions’. However, these are typically covered by income protection insurance if taken before an injury or loss.
A degenerative condition refers to a condition that has no one-off cause. A bad back is often caused by a series of small events that are not addressed or recognized. This causes your back structures to become degenerated over 20-30 years, preventing you from doing the things you love.
You can also take most private insurance with your overseas move, unlike ACC. Even if you are a New Zealand resident and injures yourself overseas, ACC will not cover the cost incurred unless you return to New Zealand.
Jane traveled to Asia without adequate travel insurance. She was injured on a scooter, and ended up in hospital. Jane could not get travel insurance as she was out of the country. Jane had to pay her own medical bills. Jane could be eligible for further treatment if she returns to New Zealand. However, any claims would need to be evaluated by ACC.
It is not easy to get private or ACC insurance coverage.
People often think they have more coverage than they do. Surprises for policy holders can result from not realizing that ACC doesn’t pay if you’re on maternity leave, or that insurance companies may offset any payments from ACC with what they will pay.
If you are self-employed, you should consult an expert to review your policies.
