How to Reduce Your ACC Costs
For those of us who are self-employed, paying ACC bills really hurts, especially for those in perceived higher-risk occupations. Take, for example, a client of mine with a family of two children on a modest income of $35,000 who recently received an ACC bill of 5.8% of his income. Yes, maybe he is in a high risk trade but there has to be something wrong with a system that charges a family with one bread-winner 6% of his income!
Now at this point I could go and on about how fraud is endemic in the ACC system, how it ought to be voluntary, how ACC should be privatised, how other countries manage without it, how much money ACC waste by paying out on daft things e.g. someone’s funeral costs when they’re rich, but there’s little point, as we have no power to do anything about it, do we?
However, there is at least one thing we can do to reduce ACC bills other than stuffing our takings into the mattress, and it’s even available from ACC – it’s called ACC Cover Plus Extra. With Cover Plus Extra (within reason) you can set your own income level, including downwards to the minimum income level of $24,000. Now isn’t this too risky I hear you ask? Well possibly, if you ever claim ACC, but not if you can get private Income Protection Insurance too, because then the income payout from the insurance will make up for the lost ACC income. And not only that,unlike ACC, the Income Protection Insurance will also cover your lost income if you’re ill – how good is that?
And better still, you may also save money too – take, for example, two typical clients of mine, as below:
|40 Year-Old Professional
Income $85,000 per year
|30 Year-Old Builder
Income $53,000 per year
|Standard ACC Cost||
|ACC Cover Plus Extra||
|Income Protection Insurance||
|Additional Costs/Saving Annually||$(81)||$42|
The saving in annual costs for the builder is perhaps not huge but consider how much you could claim if you’re too sick to work? $50,000 to $100,000? How could you pay your bills without an income? Yes the professional plays a tiny bit more but only the equivalent of 18 large coffees a year.
Now of course, it’s never that simple, because there’s a whole heap of factors to take into consideration e.g. whether you can get standard Income Protection Insurance or whether ACC or Income Protection Insurance will actually pay up in the event of a claim (trying looking on Google for cases where both have managed to get out of paying up), but it’s certainly worth looking into.
They say you’re three times more likely to be off work as a result of a serious illness than an accident. Rather speaks for itself, wouldn’t you say?
The information provided here is of a general nature and only applies in New Zealand. You should not act upon this information without obtaining appropriate professional advice and only after a thorough examination of your particular circumstances by an experienced professional.