How much do self-employed people in New Zealand know? What protection does ACC provide for the self-employed?
22 Nov 2021
In New Zealand, people often introduce themselves as self-employed or state that they are their “own boss”. Being self-employed is a very common way of making a living in New Zealand. Simply put, you are your own employer.
According to labor market statistics manager Andrew Neal, the term ‘self-employed without employees’ can also include sole traders, independent contractors, freelancers, and gig workers. So how many New Zealanders qualify as self-employed? According to statistics from Stats NZ, the number of self-employed people in New Zealand has increased by 7.5% in the year to March this year, reaching 355,000 and accounting for 13% of the total employed population in New Zealand.
So what kind of protection does the Accident Compensation Corporation (ACC) provide for self-employed individuals? YG Financial Services will address this topic below.
In a previous article, we specifically detailed what you can claim for through ACC and the scope of their cover, and talked about ACC’s protection for all New Zealanders from accidental injury. In this article we will look at the two kinds of protection ACC provides for self-employed individuals: CoverPlus and CoverPlus Extra.
Default protection: CoverPlus
In New Zealand, ACC will provide all self-employed persons with a default protection called CoverPlus, and individuals do not need to apply.
- Standard Compensation
Upon the occurrence of accidental injury, ACC will pay 80% of the damages based on your income tax return of the last fiscal year. For example, if a self-employed person had an income of $52,000 last fiscal year, Cover Plus will pay a weekly compensation of $800.
- Standard Levy
This is mainly based on the individual’s industry and type of work. If the individual is engaged in a type of work where the risk of injury is relatively high, then the fees charged by ACC will also be relatively high.
Optional protection: CoverPlus Extra
ACC also provides another form of protection for self-employed individuals: CoverPlus Extra, which requires application and review.
- Standard compensation
The compensation amount paid is completely unrelated to personal income and 100% of the coverage agreed on between you and ACC will be paid. Of course, this amount does have to be within a certain range – between $29,453 and $104,729.
In the event of an accident, ACC will pay full compensation every week until you can return to full-time work. For example, you and ACC have agreed that $52,000 will be the underwritten amount. In the event of an accident, Cover Plus Extra will pay a weekly compensation of $1000.
- Standard Levy
The levy ACC charge under this cover option has nothing to do with personal income. It is solely determined based on the amount of coverage agreed in advance between you and ACC.
What needs to be remembered is that if you want to apply for CoverPlus Extra, you must be self-employed and a non-PAYE shareholder. If you receive a salary after the deduction of PAYE from a company, you cannot apply for CoverPlus Extra.
Benefits of CoverPlus Extra (CPX)
- The predictability of the CoverPlus Extra levy amount. As it is calculated based on the agreed cover amount, you will know how much the levy will be each time. You can also tailor it to your needs as you can set the levy higher in order to receive higher weekly compensation, or choose to set the compensation amount lower for a lower levy.
- The certainty of compensation: with CoverPlus Extra the agreed cover amount will be paid in full, so you will know exactly how much ACC will pay as this will not change even for those with fluctuating incomes.
- Combination freedom: For example, if the income of a self-employed person exceeds the maximum protection value of ACC, the applicant can reduce the ACC levy and cover amount through CoverPlus Extra, and then protect personal losses through other commercial insurance policies to achieve the perfect protection combination.
YG Financial Services will go into more detail below for you, so please read carefully.
Who is CoverPlus Extra (CPX) suitable for?
- Those whose income fluctuates: For example, the difference between your income this year and last year is relatively large. If this is the case, the default compensation provided by ACC based on last year’s tax income may not meet your needs. Choosing CoverPlus Extra will ensure the levy and amount of cover is fixed.
- Newly self-employed people who have just started a business: Even with no income history, it is possible to obtain the required protection by choosing CoverPlus Extra.
- Small family businesses: For example, a husband and wife are both involved in the running of a company together, but their business roles are different. Choosing CoverPlus Extra allows you to adjust the fees and cover amount of both parties according to the needs of the family to achieve a perfect balance between protection and cost.
Comparison of CoverPlus and CoverPlus Extra
In order for everyone to have a clearer understanding of the applications of CoverPlus and CoverPlus Extra, we will use some case studies to demonstrate the differences in protection and fees.
Case number one
Xiao Zhang is a self-employed woodworker. His annual income in the last fiscal year was $50,000. According to the default product CoverPlus, the insurance coverage is 80%, or $40,000.
But he wants to get more protection from ACC. He chooses Cover Plus Extra and increases the protection amount to $50,000. Then his annual ACC payment is as follows:
|ACC protection option||Annual levy cost|
|CoverPlus Extra||$ 2,394.13|
Case number two
Xiao Li is also self-employed and has a mobile coffee cart. His annual income in the last fiscal year was $50,000, and if he stays with the default protection product CoverPlus, the amount of coverage is also $40,000.
However, Xiao Li hopes to reduce his payment and protection. Through CoverPlus Extra, he chooses the minimum amount of $29,453, so his insurance ends up as follows:
|ACC coverage option||Annual levy cost|
|CoverPlus Extra||$ 763.48|
Case number three
Xiaoming and Xiaoli are husband and wife. Both are 35 years old this year, and jointly run an advertising marketing company. Xiao Ming’s shareholder dividend is $120,000 a year, whereas Xiaoli’s shareholder dividend is $60,000 a year. If they go with the default CoverPlus, Xiao Ming will be covered for $96,000, and Xiao Li will be covered for $48,000.
The two adjusted the amount of protection through CoverPlus Extra: Xiao Ming chose coverage of $40,000, and Xiao Li chose to be insured for $30,000. The cost and cover for the pair of them is now as follows:
|ACC coverage option||Xiaoming’s annual levy cost||Xiaoli annual levy cost|
|CoverPlus||$ 1,959||$ 979.8|
|CoverPlus Extra||$ 881.87||$ 663.8|
In doing this, the pair can jointly save $1,393.13 a year in ACC levies. In order to make their own protection more complete, the two bought additional accident insurance. This covers them for $5,000 and the two-yearly premium is $481. In this way, both of them have perfect protection, and they can save $912.13 a year in premiums.
Note: Amounts will vary; the above costings are only an example. Please refer to the official ACC website for details.
After reading the many benefits and fine details of CoverPlus Extra, do you yourself have more questions as a self-employed individual?
“Should I switch from the default CoverPlus to CoverPlus Extra?”
“How much protection should I choose?”
“How can I combine it with my own personal insurance?”
Don’t hesitate; come and talk to YG Financial Services. Our professional insurance consultants will give you the best combination plan!
Address: Unit 6, 33-35 Apollo Dr, Rosedale, Auckland 0632
Tel: 027 4321 454 (Yang Gu)
021 998 699 (Joanna Zhang)
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