Can I Dial Down My ACC Levies?

Happy businessman standing with umbrella in the meadowCurrent statistics show that 75% of all businesses and self-employed people in New Zealand are overpaying when it comes to ACC levies, mainly because they are unaware of how ACC works and other available options. In fact, both contractors and self-employed business owners in New Zealand can save hundreds of dollars by reducing their ACC levies and purchasing private insurance with some of the money they save on ACC levies. There are several reasons why this approach is a wise business decision for contractors and self-employed business owners.

Reason #1: ACC is not full insurance coverage.

Self-employed people have no choice when it comes to ACC coverage. The ACC website explains this in more detail. , ACC Cover Plus is compulsory as soon as you become self- employed. However, ACC only provides loss of earnings compensation for a work or non-work related personal injury. You are not covered for any other situation, like illness or a disability that prevents you from working. In New Zealand, health statistics show that seven out of eight disabilities are not caused by injury, but by illness, which ACC does not cover. So you are paying a pretty significant ACC levy for only partial coverage.

A better alternative is to choose ACC Cover Plus Extra. It’s an optional cover that replaces ACC Cover Plus, however, very few self-employed Kiwis take advantage of it. It provides the same cover as Cover Plus, but you can choose how much you want to cover yourself for, even if it’s lower than your annual income, although you will receive less in loss of earnings compensation if an injury puts you out of work. The substantial ACC levy amount you will be saving can be used to pay for private insurance where you can get more cover for a reduced rate.

Reason #2: You might not get what you expect from ACC.

ACC Cover Plus pays 80% in loss of earnings compensation based on your previous year’s income. But you have to submit proof of your income at the time you submit a claim, something that could be difficult to do if you’re in the hospital, unable to access last year’s tax records, or haven’t completed last year’s financials. In this situation, you have to wait until you can provide the proof before ACC pays out.

When you provide the proof, and you had a lot of deductions against last year’s income, the 80% compensation might not amount to very much. Also if your income and bills have increased since last year’s tax return, you may not receive enough loss of earnings compensation to meet your expenses.

There are also instances where you may not receive ACC Cover Plus payouts even through you paid the ACC levies. For example, you may not receive loss of earnings compensation if your business continues to make money while you are unable to work. ACC payments may also cease if you are unlikely to return to work again, return part-time to work, or if you are able to work in an alternative role other than the one you worked in before your injury.

To avoid playing a guessing game with ACC, there is a better solution which is to select Cover Plus Extra, request a lower loss of earnings compensation amount to reduce your ACC levy and fill in the gap with private insurance such as income protection, mortgage protection, or life insurance.

Reason #3: You can save significantly even when supplementing with private insurance.

Some self employed business owners have saved thousands of dollars in ACC levies every year by dialing down their ACC cover to 40 percent. By lowering your level of accident compensation cover, you pay less in ACC levies, giving you extra money to obtain more comprehensive insurance to cover you for illness, disability, death and other circumstances for which ACC does not provide compensation.

Private insurance options include income protection insurance, mortgage protection insurance life insurance. Cost analysis have shown that most self-employed people can reduce their annual ACC levy by about 50% by dialing down their ACC cover and supplementing it with private insurance. In the end, you’ll be covered for personal injuries, accidents, illnesses, disabilities, or any other situation that keeps you from working, and you’ll be paying much less for that comprehensive coverage.

Reason #4: A business needs comprehensive insurance to remain solvent.

While ACC only covers you for medical procedures, hospital stays, tests and rehabilitation, private insurance covers you, your family, as well as your whole business. It provides the funds for replacing key personnel in the business if they are unable to work. Private insurance also covers you for any loss of profits your business may suffer while you or key personnel are unable work. Having private insurance also makes it easier to obtain a temporary loan, if needed, to get you through the interruption in business until you or key personnel are able to return to work.

Reason #5: The availability of a rates and cover comparison ensures you get the right insurance.

When it comes to being properly insured, ACC is only part of the solution. Private insurance provides the rest, making sure that you, your family, your home and other investments are protected in the event you are out of work and unable to earn an income. One of the easiest ways to find the right insurance product for your needs is to do a rate comparison of the leading insurance companies. This will allow you to compare cover and costs so you can obtain the insurance cover you need at a price you can afford.

Rather than spend time contacting different insurance providers, you can use our free rates comparison. It’s available 24/7, and is quick and easy to do. You’ll receive an easy to understand comparison detailing the various cover, limits and rates from up to seven different insurance companies.

If you are considering reducing your ACC benefit to save on ACC levies, be sure to talk with us first about filling the gap with income protection, mortgage protection, or life insurance. We’ll guide you by providing answers to your questions and supplying you with the information you need to help you make the right insurance choice for you.