Congratulations on your choice to move to New Zealand!

We may just about be the farthest country from just about anywhere on the planet, but it is the best country in the world.

If you have just stepped off the boat or you have been here for a while, you are probably in for a bit of culture shock. While things here often look the same as home, they are just a bit different.

In basic terms, income protection insurance in New Zealand replaces a percentage of your income when you cannot work in your own occupation due to medical or injury reasons. 

It is designed to provide 75-80% of your in-hand earnings when you are disabled at claim time.

Most policies today have a range of options and different flavours. Fundamentally, there are two types: those you pay tax on at claim time and those you do not. 

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?

Maybe you should have another look. This opinion piece in the New Zealand Herald is a great example of why you need a good risk adviser, who also works with ACC, as well as your insurance. 

No, you employed people aren't exempt from this either. If you plan on taking a break from employment for any reason you too need advice on your ACC coverage for accident disabilities and weekly compensation.

Change, it seems to be the only constant. Innovation and new products from businesses seem to be a constant stream. 

In the world of insurance and risk, it is much the same. In 2015 ACC paid $718,000,000 to cover the cost of work-related injury claims.

You've got a fairly steep learning curve going on and ACC has just thrown a spanner in the works. It's a spanner in the works because ACC isn't intuitive and you're short on time and don't have time to figure this crap out right now.

If this resonates with you, you need to read this, it will short cut this for you.

Let's start with the simple things you need to understand first.

If you are self-employed the answer is you should! We don't joke about this, restructuring your ACC will give you more certainty if you are disabled through an accident and if you have talked to a financial adviser and arranged income protection, you will have more certainty for non-accident disabilities as well.

Let me start at the beginning. You started your own business and you have been doing your thing for a few years, you have no income protection because you have got by this long without it.

Mobile phones, those funny devices that used to be the domain of yuppies and annoyed those looking for a quiet dinner out, now we can’t get by in life with out one.

The expectation is you’re now available 24/7 and your smart phone will substitute all manner of thinking requirements.

We’ve heard plenty about mobile phones and driving, yet people still hold their phone while driving. No, holding it in your hand on speaker phone is not hands free ;) ahh, it’s still in your hand!

Though, they are causing all manner of distractions, and my couple of weeks driving an electric vehicle highlighted this, as I nearly mowed down at least 6 or 7 ambling pedestrians.

This is what we achieved for one of our clients without getting creative on cover levels and types of cover, the creative bit is likely to be another $2-3000 per annum ongoing.

So what have we achieved?

We've managed to achieve a $2,500 per year average saving on what they were previously doing and this applies to what they do going forward. Add to this an additional $2000 per annum after restructuring how they're covered, giving an expected savings of $4,500 per annum ongoing.

Significant in most people's book, so how did we achieve this?

ACC have published the new motor vehicle levies and they make interesting reading.

ACC have gone through and assigned a rating system from L1 to L4 for most vehicles, L1 being the most expensive and L4 being the least. If yours is not defined then the levy works on a year of manufacture basis. L1 for older vehicles and graduating though to the cheapest L4 for newer vehicles.

The reason I’m writing this is I disagree with some of the assertions in the NZ Herald article. ACC have done this review based on claims risk from actual injury data not vehicle safety. Injury’s drive ACC’s costs, not vehicle safety. Yes safer vehicles generally means less injuries and less ACC cost, but that doesn’t always translate directly from vehicle safety testing.

A posting on LinkedIn got to the crux of this quite succinctly. If your business cannot run without you for 30 days, you do not have a business.  You have a J-O-B with a very expensive sign that has your name on it. When you can sit back and say ‘my business will work without me’, you probably have a strong business and a succession plan.

KPMG International’s 2014 Global Audit Committee Survey has highlighted some positive things about the management and structure of New Zealand companies, specifically around the role of CFO.

It has also highlighted issues with succession planning. When it comes to succession planning, New Zealand is doing just as poorly as the rest of the world.

ACC (Accident Compensation Corporation) is New Zealand's unique no fault accident rehabilitation and support system

Ok, most of you know about ACC covering you for your medical expenses to treat you and recover from an accident. 

If you have had an accident you probably found this to be partially funded and you had to pay something towards the costs, depending on what you needed to be done. Which is a little disappointing but medical expenses only go so far.

The other aspect people know about is the replacement of income if you are off work in an accident situation, where 80% of your lost income can be replaced after seven days while you recover.

The things people may not fully appreciate are the other benefits and situations ACC cover which you need to be aware of.

I cover a lot of ground in this post, though a bit of a lengthy technical one. Maybe that's part of the reason protecting incomes is not high on the completed tasks list, as policy details can get quite complicated.

I have mentioned before that income protection in New Zealand is not something that is well covered, much like the rest of the world. With about 80% of the population without financial support in a non-accident disability situation. This comes with potentially limited support with ACC. There is a lot of exposure not only for you personally, but also for your family members, co-workers, suppliers and clients.

What is the real risk?

You are not alone; most business people comment that ACC levy invoices do not make much sense.

Part of the reason for this is the way ACC levies are calculated, some in advance and some in arrears. Often this is not in a sequential order so you might be paying this year's and paying a wash up on a year before last. This is usually because of the way you have reported your accounts; this is also across two or more levy invoices. Added to this the various components to cover the past and future risks ACC have, credits that happen if you have overpaid a portion calculated on a prior estimate.

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.