Insurance adviser can reduce ACC levies for self-employed
AUCKLAND-BASED risk insurance adviser Leighton Kearins believes self-employed New Zealanders would be better off reducing their ACC levies and taking out income protection, medical and life insurance policies.
Mr Kearins says statistics show New Zealanders are more likely to be off work for a lengthy period of time due to a serious illness rather than an ACC claim.
As things currently stand, ACC’s standard CoverPlus policy pays 80 percent of the previous year’s income to anyone who is injured during an accident and cannot work.
Mr Kearins says that is not ideal for anyone who is self-employed because their income fluctuates yearly.
For instance, if a farmer who made a financial loss last year had an accident on his farm today and was told he could not work for 12 months, he would receive no financial compensation from ACC.
“Why is the standard ACC practise bad for a self-employed person? Because you’re banking on the fact that you are going to have a good year last year,” says Leighton Kearins.
Mr Kearins suggests those who are self-employed should consider lowering their ACC levies by switching from ACC CoverPlus to ACC CoverPlus Extra.
Switching to ACC CoverPlus Extra means people can negotiate a pre-agreed level of lost earnings compensation – regardless of what their income was the previous year.
Those on ACC CoverPlus Extra do not have to prove a loss of earnings should they be unable to work due to an accident-related injury.
Mr Kearins says ACC CoverPlus Extra offers another benefit when it comes to income splitting.
For example, let’s say the aforementioned farmer had a wife who managed the accounts for the farm.
If the pair were income splitting and on ACC CoverPlus, she would be considered a farmer and be forced to pay the same levies as her husband – despite the fact she doesn’t do any manual labour.
ACC levies are calculated by how dangerous your job is and how many injuries/deaths occurred in that profession the previous years. Farmers pay high levies as there is more chance of them being injured.
But if her husband switched to ACC CoverPlus Extra, her ACC code could be reallocated and she would be deemed an admin worker – hence there would be a significant reduction in her ACC bill.
Leighton Kearins says it’s important to remember that switching from CoverPlus to CoverPlus Extra will not affect any of the other benefits tied to ACC.
“It just changes the amount of money you receive should you be off work for a period of time due to an accident.”
As far as overall savings go, Mr Kearins says they will vary depending on what line of work people are in.
A real estate agent making around $113,000 per year could reduce their ACC bill by nearly $1600 if they switch to ACC CoverPlus Extra.
A builder earning a similar income could reduce their ACC levies by around $3800.
Of course, there are risks associated in switching from ACC CoverPlus to ACC CoverPlus Extra when claiming for the accidental death benefit.
Reducing your ACC levies means your spouse and children will receive less financial compensation should you die as a result of an accident.
However, as Mr Kearins says, the chances of that happening in New Zealand are slim.
“What you have to remember is that there is only a five percent chance of someone dying in New Zealand as a result of an accident.
“Eighty percent of people who are off work for more than three months, it’s usually because of a serious illness, while 90 percent of people who are off work for more than two years never return to their occupation.”
As ACC only pays out in the event of an accident and will force you into another occupation if you are no longer able to do your current profession, Leighton Kearins recommends that self-employed people should also take out income protection, medical and life insurance policies to ensure they have all their bases covered in case something unexpected happens to them.
“Your income and treatment costs are not covered [under ACC] should you be off work due to cancer, a stroke, trauma or you are unable to do your job for some other reason. These things can actually put you out of a job permanently,” he says.
“Income protection will cover you if you are medically unable to go to work. That means accident and illness.
“Life insurance will cover you regardless of how you die. It also pays out if you are diagnosed with a terminal illness and are given less than 12 months to live. It’s a far more robust system.”
As the risk insurance adviser every New Zealander needs to speak with, Mr Kearins is more than happy to help people review their ACC and any insurances they currently have in place.
“My job as an adviser around ACC and insurances is to try to optimise the amount of cover you have for the money you spend,” he says.
“The big thing to remember is that none of this is a template scenario. What works for Joe the farmer does not always work for Tim the banker. It’s about sitting down with a client and figuring out what works for them.”
So the next time you want help with your insurance or want to review your ACC levies, make sure you touch base with Auckland-based risk insurance adviser Leighton Kearins.
He’ll see you right.