Let us say you are a builder and you take a tumble off the roof on a job and break your pelvis. (There have been one or two of these situations, it does happen) You are carted away in an ambulance to emergency and they patch you up.

You are now looking at 12-13 weeks for recovery. You will need assistance for things you never thought you would, nor will you like it much.

After 7 days, ACC will be paying to replace 80% of you provable tax assessable income, which is also tax assessable, and you are still lying in a hospital bed. At this stage of the game, you are starting to do your head in and depression is a real risk for you.

I have heard it all before, not me right? Well it happens to the best of us when faced with this sort of situation.

What is done about now will determine what your ultimate recovery looks like. If you do not have income protection of some sort, it is likely you will not get the additional support you would get from an insurance company to get through this. I’m not talking about the money but about the additional medical resources to assist your recovery.

Once you are healed and cleared for work ACC will step back and leave you to it. If you cannot do your job then they will have you head towards another job you can do or push you off to the sickness benefit. If you can work in your old job then all is good.

What is the insurance company doing during all of this?

The insurance company will be assessing your situation. As this is an accident then ACC will be the primary provider to replace your income. The insurance company will top up ACC if there is a shortfall difference in payments under your contract and the wait period is finished. As the situation above is bed confinement, then it is likely you will have the wait period waived under a bed confinement benefit.

The insurance company is entitled to offset ACC payments with your income protection, meaning in an accident situation you won’t get paid while ACC is paying you.

If you have Mortgage Repayment insurance then it is likely there are no offset clauses and your mortgage payment would be paid in addition to ACC. Some companies also offer household expenses under similar terms and conditions to mortgage repayment policies.

Payments aside at this point, the insurance company will be waiving your premiums on your policy once the wait period for this is finished and while you are still totally disabled.

In the example above, the insurance company will probably also organise support to mitigate the depression risks you as the client face. Even if ACC is the primary provider, once you have healed and you still cannot work because of a mental health condition, you then become the insurance company’s responsibility. The later they get involved the costlier the claim will be for them.

Why have we taken this approach to explain disability?

ACC involved equals less personal insurance risk right? Not so much.

We have done this to show you the mechanics of protecting your income in New Zealand. With an accident, it becomes far more complicated because there are more moving parts in your financial support for disability.

The majority of long-term disability claims are for mental health conditions. Often people who used to think it would never happen to them. Sovereign’s claim statistic at one point was 40% of initial disabilities were for mental health and 80% for long term claims, with a major portion of the long term claims being secondary mental health disability. It is possibly still similar numbers.

Dealing with this can be frustrating, difficult and challenging. You as the patient started with a physical disability and now you have a cognitive disability. Your ability to understand and reason is compromised. You are dealing with doctors, specialists, ACC, friends and family and insurance companies and it can all be a bit much.

Who is on your side? If you have private income protection insurance, then your adviser should be. They arranged your cover, they know you and your situation and they know how the insurance companies and ACC work. They can help navigate this on your behalf. They are the able bodied when you are not. Make sure you have one.

My next post I’ll talk about disability in a non-accident situation, it might surprise you.

In the mean time if you want to discuss protecting your income, get it touch

The information is only intended to be of a general nature and should not be relied upon in any part without obtaining full details of the products and services by contacting Willowgrove Consulting Limited. All product and service details, terms, conditions and other information are subject to change at anytime without notice. Terms, conditions and fees apply to the various products and services and are available on request. A disclosure document will be provided to you on request free of charge.