Insurance
4 min read
Author: Ed McKnight
Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.
Reviewed by: Laine Moger
Journalist and Property Educator, holds a Bachelor of Communication (Honours) from Massey University.
It’s pretty safe to say people don’t like paying for insurance.
But what if I told you that you already are … you just don’t call it insurance; you know it as ACC.
Most Kiwis feel pretty comfortable knowing that if they have an accident, ACC will cover them.
But what many don’t realise is how much they’re actually paying for it, and what it doesn’t cover.
In this article, you’ll learn how much you currently pay for ACC and what it does and doesn’t cover.
ACC is short for Accident Compensation Corporation.
It basically means that if you get hurt in an accident, ACC steps in to cover. They’ll pay for things like:
You can have an accident anywhere – at home, work, or doing the shopping. It doesn’t matter. ACC pays.
That probably gives you a lot of confidence that if you get hurt you’ll be looked after.
You might not know this … but for every $100 you earn, you pay $1.60 to ACC.
That’s as of April 1, 2024.
So if you earn $100,000 a year … you already pay $1,600 to ACC. That’s on top of your tax and it gets taken out by your employer, so you might not even realise you’re paying this.
But there’s a cap.
At the time of writing, once you earn over $142k a year, you don’t pay more for ACC.
That means the most you’ll pay in a year is a little over $2k.
There are many times where ACC is really helpful for Kiwis.
A school teacher I know once fell over in the garden and broke her wrist. She was unable to drive for 6 weeks while the injury healed. ACC covered her treatment, and for a taxi to take her to and from work everyday.
But it’s important to acknowledge ACC (and the government) doesn’t protect you from all things that can go wrong.
As great as ACC is, it only pays out if you get injured in an accident.
It doesn’t cover injuries that happen over time due to your lifestyle.
So, maybe you have back problems from poor posture. Or maybe you’re a tradie, and after years of working on building sites you’ve got issues with your knees.
In that case, you’re out of luck. Unless it’s a fresh injury from an accident … ACC won’t cover you.
ACC also doesn’t cover:
That means if you develop a serious illness, ACC won’t step in to help.
There is also a limit to how much ACC can pay out, and that’s $135k. So if you’re a high-income earner, ACC might only pay out a smaller portion of your income.
This is why Kiwis should also consider getting other private insurance.
You already feel good knowing that ACC will help you out in certain situations, and you’re already paying for that comfort.
Taking on extra insurance means you can protect yourself from more bad scenarios, and that will supplement your ACC.
ACC and other insurance cover sometimes run separately and at other times dovetails. It depends of the claim details.
If John comes off his mountain bike and breaks his leg in 2 places, ACC will pay him 80% of his income (up to the ACC cap) and, on top of this, Mortgage Protection Insurance will also pay John up to whatever amount was agreed at the time he took out cover.
But some other insurances don’t pay out at the same time as ACC. For example, your payout from income protection insurance may go down if ACC is also paying you, although that’s just for injuries.
Your other insurance will step in for things like cancer treatment or non-accident-related surgery.
And because we have ACC in New Zealand, your premiums are usually a bit lower than if you were living overseas.
Here’s the thing: You’re already paying for ACC.
But ACC only covers accidents. It doesn’t cover illness, disabilities, or overseas incidents.
In my view, if you’re already spending 1.6% of your income on ACC ... it may be worth spending just a bit more on personal risk insurance to round out your coverage. That way you’re protected no matter what happens, not just in the case of an accident.
If you want full protection, consider talking to an insurance adviser. They can tell you about additional cover that works with ACC, rather than relying on it entirely.
Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.
Ed, our Resident Economist, is equipped with a GradDipEcon, a GradCertStratMgmt, BMus, and over five years of experience as Opes Partners' economist. His expertise in economics has led him to contribute articles to reputable publications like NZ Property Investor, Informed Investor, OneRoof, Stuff, and Business Desk. You might have also seen him share his insights on television programs such as The Project and Breakfast.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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