Comment: Investing in the right ACC

By: By David Boyce, CEO, NZ Trucking Association

Correct ACC premiums are a tricky business, but if you're self-employed or a contractor CoverPlus EXTRA might be the right coverage you need when you are too injured for work

It can be confusing to know if you have the correct ACC cover because your options are not widely publicised. Many people pay ACC premiums but don’t realise that there are options or that the cover they have may not pay the amount that they think.

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If you’re self-employed or a contractor and you can’t work because of an injury, you’re covered by CoverPlus. This is to ensure that you will still be paid while you’re recovering. This cover is automatic and is rated when you file a return. However, if you cannot prove your earnings at point of claim, then your payment will be less than you may have expected.

A common problem is when a husband and wife team split income for tax purposes. If you do this, then you will only get 80% of your part. Another situation is when you may have just started your company and may not have had 12 months or more trading as self-employed. This situation makes your claim difficult, as you will not have a full year’s history of income and your financials may not be completed.

However, CoverPlus EXTRA is an option that works in such scenarios. It enables you to agree on an amount of compensation should you be injured and are unable to work. It’s a set amount so you can be assured that it’s going to be paid, and the claim process is much quicker.

Members that we talk to often tell us their accountant has sorted it, however, what we find is that some accountants just have their clients on CoverPlus and not CoverPlus EXTRA.

Just take a minute and think about if you were injured today, how would your business cope and how would you get paid?

CoverPlus EXTRA might suit you if:

  • You want control over how much you pay in levies, as you can choose to lower the level of cover and, therefore, you pay fewer levies.
  • Your earnings vary every year. You can choose the set amount of income you require.

ACC will pay you 100% of your chosen amount of weekly payments until you get back to work. For example, if you choose $52,000 per year as the level of income cover you want, ACC will pay you $1000 before tax.

To be eligible for CoverPlus EXTRA,

  • You must self-employed, a contractor, or a non-PAYE shareholder-employee, work full-time or part-time, and your earnings are above $25,376

You can go online to to find out what the cost would be for you. ACC only covers injuries, so it’s important that you also think about situations when you’re ill from sickness and how you would survive financially if you couldn’t work. It’s worth checking if you can privately insure yourself in the event of an illness.

What to think about when considering premiums

If you’re a member of the NZ Trucking Association, the association has relationships with experienced insurance advisors and can put you in touch with someone who understands transport and could give you some advice.

Think about taking a longer stand-down period, as this will reduce your premiums. To fully understand your risk, it’s a worthwhile exercise to find out what your options are and how much it would cost. That way, you can decide how much you want to insure.

It’s interesting that people don’t worry too much about borrowing thousands of dollars to purchase a new truck or equipment but generally don’t think about what happens when a life-changing event occurs.

Death will happen at some point. We just don’t know when. So, if you have debt, it’s important that you protect your family. An advisor will be able to discuss your risk profile and make some suggestions.

Lump sums are available as well if you suffer from certain illnesses that don’t keep you away from work long, but you might need cash to re-organise your life or pay for treatment.

Once you have a plan in place, make sure you review it regularly, as there’s no use paying for something if you don’t really need it. Set up your review dates with an adviser so you’re always up to date.

While you’re sorting out your risk, this is a great time to update your will, as it’s a legal document that outlines how your estate can be settled in a way you want it to be. If you don’t have a will, then your family will have limited say in what happens and the law will take the final decision.

In effect, you end up paying a lot to a lawyer who you wouldn’t have had to pay if you had a will. Every adult should have a will and it should be updated regularly to include any new life-changing events such as a baby, marriage, and a new relationship.

A will is straightforward and it’s a small cost for what would be a huge problem if you don’t have one. While you are discussing your will, talk to an advisor about business succession. Moving your business on when you’re ready should be in your overall plan.

If succession is started early, it will be a straightforward exit. It may be that you need to set up a family trust or you need life insurance, so in case of an untimely demise, the business succession can continue as you’ve wished.

If you would like to discuss any details of this article, contact the team at NZ Trucking Association on 0800 338 338. 

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