If you are self employed, who pays you when you can’t work?

Many people think ACC will pay if they get sick.

emptycanBut ACC only pay for "accidental injury", not sickness or illness

and ACC definitely only pay up to a limit. This represents a huge risk to most New Zealanders as the historical statistics show that 5 out of 6 disabilities are caused by illness - not accidents.

One insurance company revealed in it's claims statistics that the average age of the worker making a claim on their income protection plan was 43 YEARS OLD - obviously many are younger and many much older. This "average" age though is when many have their largest personal financial commitments. So often, when people can least afford to take the risk, they most need protection.

If you do have an accident then ACC should provide something. Often however it is not as much as people hoped, because many self employed legitimately minimize their personal taxation position – and ACC work on you personal taxable income at claim time.

For the self-employed there are a few things to do that make good sense, and can help to avoid the problem entirely.

  1. Get some professional advice to work out what ACC might provide, and which of the ACC products are the best choice in your situation.
  2. Build up some cash reserves so you can self fund a month or two, and park the reserve outside of your business.
  3. Consider some of the business insurance plans that can put money into your business, by covering temporary loss of a key person (like you!) or covering some of the overheads and expenses. They are a business expense too by the way...
  4. Once you've covered the first 3 steps it makes sense to work out what shortfall there might be coming into your household from your business and then look at your personal insurance protection.

It is possible to set up your affairs so that money comes in if you are too ill to work in your own business, and with some good advice and good planning you can do it in a way that gets the best out of ACC, and your business, and your personal insurance plan.

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The information on this site is intended as a guide only. The information is of a general nature and does not and cannot ever constitute personal advice.
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