An interesting question that is often asked. In a nutshell, whatever you like, just that it gets deducted from your ACC weekly compensation claim.

ACC weekly compensation is there to cover loss or replace a loss of income. You earn something that loss is reduced; your ACC payment will be reduced too.

How does this work?

When ACC started paying you, they would have determined your earnings before your accident causing your disability. This pre-disability earnings level sets your weekly compensation at 80% of this on the standard workplace or cover plus ACC weekly compensation. 

Assuming you were working at the time of the accident.

How your earnings get affected as you start back to work will general be something like this.

$1,000 per week pre-disability will be $800 per week ACC weekly compensation. You earn $100 as you are recovering, the ACC weekly compensation will be reduced to $700. 

Keeping in mind there is tax taken out so the amount of money you receive will be lower because of this.

If you are a business owner or self-employed, then you have an additional option with Cover Plus Extra. Cover Plus Extra you have to apply for before you have a claim, and it is an agreed value version of ACC coverage. 

If you have it and have an accident disability, you do not have to establish the financial loss to get an accident weekly compensation claim, just the accident causing disability.

If you are an employee, then the 80% approach applies, that is it, there is not another ACC option for you. 

If you are not working at the time you have the injury causing your disability; you won't qualify for weekly compensation. 

Either at the point of injury or if the treatment is later on, when you receive your treatment, regardless of your work status at the time of treatment. 

• In both the standard 80% or Agreed Cover Plus Extra, ACC will deduct the tax before they pay you.

This also applies to business people with little to no income or if your financials are significantly behind. This blog article of mine explains more.

Back to you business owners.

With Cover Plus Extra, there are three key advantages to getting this cover with ACC

First

In a weekly compensation claim situation, you do not have to prove loss. On the standard cover, if you are disabled in an accident and your financial statements are not available. You can sign off on having a loss of income pending financial statements, then if you can't prove it, ACC will want their money back. 

With the Cover Plus Extra, you are disabled in an accident they pay, no loss they pay, cannot prove it at the time, they pay. If you have a fluctuating income, this cover is perfect for you as it smooths things out.

Second

As you return to work from an accident disability, unlike the opening situation above, ACC do not deduct earnings. If you are doing 45 of the 50 hours you used to do, they still pay a full weekly compensation claim.

Third

And certainly not least, you can split your occupation coding to suit your shareholder's activities. i.e. plumber and his wife, let us call them Bob and Mary. 

Bob does the heavy work, and Mary does the books, accounts and admin. Under the standard cover, income paid to both of them is levied at the plumbing rate. 

By moving to Cover Plus Extra, Bob’s levy will not change much; he will get the advantage of points 1 & 2 above but will still pay as a plumber. 

What you will get is the ability to have Mary charged at the administrator’s rate rather than the current plumbers rate. Generally, this will save several thousand dollars per year.

Why you need advice

This last point is where me, as your insurance adviser, and a review come in. 

For Bob and Mary above, if Bob's disabled in an accident then under either Cover Plus or Cover Plus Extra he's likely to end up significantly under-compensated by ACC, as it is based on his split of taxable earnings, not the full earnings they jointly pay tax on.

For Mary an accident disability, under the standard Cover Plus, is likely to result in no claim, as the earnings her tax is paid from is generated by Bob. As Bob is still working, there is no loss.

Under Cover Plus Extra, being agreed and not needing to prove loss at the point of claim, Mary would receive a weekly compensation claim if disabled in an accident.

The biggest issue

The real issue is replacing Bob’s income if he is disabled. Being in a trade, his accident disability risk is about 50%. 

If Bob is splitting his income, he is going to have a significant shortfall with an ACC claim, and if it is not an accidental disability, then he is going to have 100% shortfall on their combined income.

By working with an insurance adviser, like me, you can restructure the ACC cover on the agreed value version and expand income protection coverage from the ACC Levy savings. 

This will ensure that Bob has full coverage of his income if disabled in an accident or through another medical disability situation.

Give me a call