Four reasons why you can’t rely on ACC.
Reason No. 1: ACC pays out only due to accidents. The reality is that most of the disabilities that you are likely to get that will stop you from working, will NOT be covered by ACC.
Reason No. 2: ACC does not continue paying long term. ACC will at some point stop paying you and refer you to WINZ for a sickness benefit, this pays about $9000 per annum–could you live on that?
Reason No. 3: ACC only pays while you can’t work at ANY job. If you still can’t return to work in your own occupation, BUT you can work in some other job (e.g. Labourer, Receptionist, etc) then ACC will stop paying you.
Reason No. 4: ACC pays you 80% of your income based on your most recent tax return. The tax return could well be over 12 months out of date and reflect quite a different income from what you are earning at the time of your accident. If you are self employed (or a shareholder/employee) you MUST pay ACC, you have no choice. However you CAN choose HOW MUCH you pay to ACC and still make sure your income is protected!
There is a solution which will solve ALL four problems and it may save you some money as well!
MBS Insurance will provide you with a simple one page spreadsheet showing you:
• What you pay now for ACC and how much you are covered for.
• How much ACC CoverPlus Extra (CPX) will cost on the minimum of $23,712 pa.
• How much you will save each and every year by reducing your ACC cover.
• And how to make sure your income is covered for accident and sickness so your biggest asset is protected, your ability to earn an income.
If you are self employed and think ACC will pay if you have an accident think again! You may get a lot less that you thought!
Here’s the Problem
With normal ACC CoverPlus (not CoverPlus EXTRA, most people have CoverPlus) you must prove your income at the time of claim. This can be very difficult for self employed people, especially if they don't have their latest accounts completed or if they are laid up in bed or hospital. If you can’t prove income or have had a good accountant writing back all possible deductions against your income, then you may not get paid much at all.
Your income and costs may have increased since your last tax return, meaning any compensation you receive may not be enough to bridge the gap. This is especially the case is you have a fast growing business and need cash to cover the cash gap between paying for expenses and receiving cash from customers.
Here’s part of the Solution
With CoverPlus Extra (CPX), you apply for a pre-agreed level of accident compensation. The highest amount you can apply for is 30 percent above the income you earned last year up to a maximum of $92,871 (for 2012/2013). ACC may consider you for a higher amount, but it’s up to their underwriting team. The process can sometimes seem complex and a little confusing, but fortunately at MBS Insurance we can give you free advice in this area.
Reducing your ACC Levies
If you’re self employed and are on CoverPlus EXTRA you can choose to reduce your level of accident compensation cover, and thus reduce your levies. The minimum ACC cover is $23,712 per year. However that mean’s you’ll only receive $432 per week before tax if you have an accident. There are also other important ramifications associated with reducing your ACC cover and many financial advisors, and even accountants, are not familiar with how this may negatively affect you. So before you dial down your ACC make sure you talk with an adviser who is competent in this area. We have specialists who can identify ways you can reduce those risks and protect yourself and your family properly.
Work 30 hours per week, and still get paid your full benefit
You are of vital importance to the continued survival of your business. If you weren’t around, then your business would likely stumble and gradually wither away. With CPX, you can work up to 30 hours per week and still receive your full benefit. On the default ACC program which all employees and self employed people are automatically enrolled, CoverPlus (not to be confused with CoverPlus Extra), you have no such luxury.
If you’re on the default CoverPlus, then your accident compensation is abated accordingly to how much you earn from your occupation.
Your partner, with a PAYE job can apply for CPX too. As long as they have a role in your business, your partner can apply for CPX as well. They can even be working in another job earning a PAYE income and still opt into CPX in your business.
Income splitting couples can choose their level of compensation – Often your accountant will advise that splitting your income will reduce your personal income tax as you’ll be paying tax at lower marginal rates. This is good advice from a tax perspective. Often this advice is given to couples who have one partner who earns the bulk of the income, with the other partner earning less, but still contributing to the business.
The disadvantage of splitting your income for tax purposes is that if the breadwinner is off work due to an accident, then they only receive half the compensation they would normally receive. If the breadwinner earned $100,000, and this was spilt to $50,000 for the breadwinner and $50,000 for the other partner, the breadwinner would only receive $40,000 in accident compensation (80 percent of $50,000). For a family that is used to living on $100,000, a drop in family income to $40,000 is a major hit.
That’s why CPX is superb for income splitting couples. You can choose to allocate more of your insurance, be it accident insurance via ACC or private income protection, towards the breadwinner whose importance to the family is much higher.
• Reinvest the levy savings into better insurance
• Agreed payout
• Dangerous hobbies can be insured for
• Tax deductible
• Interest free loan
CoverPlus Extra isn’t perfect. Here’s the bad news…
You have to pay in advance… Though that’s a small price to pay for the advantages it can give you.
As a business owner you need specialist advice in this area. We can help, and our service is free. Phone 0800 627 467