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ACC CoverPlus Extra: The Sneaky Trap And The Direct Debit Fix
•Zebunisso Alimova
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If you’re self-employed and your ACC invoice makes you wince, there’s a good chance you’re paying for cover you can’t fully use, or missing the cover you actually need. We sit down with Blake to unpack ACC CoverPlus, the income cap that limits weekly compensation, and why your occupation and CU code have such a big impact on what you pay. Using a simple builder example, we show how someone earning over the ACC threshold can be paying top-dollar levies while their cover still caps out.
Then we get practical about ACC CoverPlus Extra. We talk through how choosing a lower level of ACC earnings cover can reduce levies, and when that can be smart because you’re already funding private income protection. The bigger idea is not just saving money, but building a plan that covers both injury and illness. ACC covers injuries, but it does not cover illness, and most long-term time off work tends to come from illness claims. The right income protection insurance in New Zealand can fill the injury gap and add illness cover, but only if the policy is structured to work alongside ACC.
We also flag the traps that catch real people: missing a CoverPlus Extra payment and quietly reverting back to CoverPlus, exclusions on income protection for old injuries, and CU codes that no longer match the work you do. We finish with clear next steps you can take today, including getting your CU code confirmed in writing and getting proper advice before changing cover. If this helped, subscribe, share it with a self-employed mate, and leave a review. What’s the one part of ACC you want us to explain next?
If you're self-employed and you're currently paying ACC, this is the episode for you. Listen up. I've got Blake in the house. Hello, Blake.
SPEAKER_00
Hello.
SPEAKER_01
ACC Cover Plus.
SPEAKER_00
Yeah, ACC Cover Plus. That's a lot of words. It's confusing. I've been doing this for a long time and it's it's it's a trial-by-error process to understand it all. Uh-huh. Tell me more. Tell me more. Well, okay. So when you're self-employed, you have to pay your own ACC levies. And generally, well, that's what you pay to ACC is based off what you earn in your last financial year or
what income's declared. Up to a maximum of around about $150,000. So your coverage with ACC caps out at about $150,000. $150,000 per year. It changes each year because the levies change and how much cover you can have changes. Now, if you earn over that amount and you're if you need to use ACC, it caps out. So you can only ever be insured through covered through ACC up to 80% of the $150,000. Okay. So what does that mean? That means you pay the highest amount towards ACC if you are earning over that threshold of $150K a year. And the way ACC levies worker, your levy, i.e. what you pay, is based on your occupation. So if you're on a manual occupation, like a trade tradesman, a builder, for example, would be higher. It's a lot higher because I guess through ACC's eyes, there's more risk of you hurting yourself.
SPEAKER_01
There would be 100%.
SPEAKER_00
Yeah. So if we use an example, I've always found a builder's a good example. So he's a builder who earns over 150,000, so he's paying the maximum, or her, it's paying the maximum. And roughly that would be about four and a half to five thousand per year, just for ACC. And just to remind everyone that ACC only provides coverage for injury. They don't provide cover for illness.
SPEAKER_01
No.
SPEAKER_00
Now, if you what a lot of self-employed people don't understand is that they have options when re or when structuring their ACC levies. So by default, this builder that we're using as an example, and most people who get into business are put on what they call ACC Cover Plus. Now they have a second option which allows them to restructure their ACC coverage,
and this is called ACC Cover Plus Extra. Yes, once again, the the name the names are a bit hard to follow. So if you think of Cover Plus Extra as the one where you can reduce your ACC coverage. Now, our builder here, let's call our builder Graham, for example. So Graham's earning over 150k, he's paying $5,000 a year to ACC. We have a chat. I say, Graham, why are you doing that? You've got income protection as well, privately. So now you're paying full amount for ACC, you're paying a full amount to income protection, and you can't actually claim the full amount on both of them. So you're actually throwing money out the window. Graham, we need to talk about ACC, cover plus extra. We can reduce your coverage from the 80% that cover plus gives you down to a minimum, which changes each year of around about, let's call it 40%. So what that actually means is if you're paying $5k a year to ACC, you can reduce that. This is just pulling figures out, but you could reduce that around to about $1,500. In some cases, less. So all of a sudden you've got a $3,500 saving. So what do you do with that money? Go to a party, put it in a savings account, go on holiday. But if you did this, reduce your ACC coverage and save all this money, and then you actually have an injury.
unknown
Yeah.
SPEAKER_00
In Graham's case, he's got income protection, so that would actually cover the shortfall. But some people don't have the income protection. Hence why you can reduce the coverage, use the money that you're saving to consider the income protection. Why would you do that outside of it's a smart thing to do? Is well, now you're gaining the shortfall of injury cover that you've reduced under income protection, but more importantly, you're gaining illness cover.
SPEAKER_01
That's right.
SPEAKER_00
Which you don't currently have.
SPEAKER_01
With ACC, because ACC will only cover injuries. Correct. It doesn't cover illness, but income protection has the coverage for illnesses as well. Yep. So if Graham got cancer and had to take time off work be off the tools, that will kick in and pay.
SPEAKER_00
That's correct. And that's why it's important about having uh structuring, well structuring your cover correctly with ACC if you're self-employed. As I mentioned, there's two ways of what where that would relate is one, you might already have income protection, and then you're paying for two, the top maximum for ACC and income protection. So you need to reduce that and restructure it so you're not paying money out the window.
SPEAKER_02
Yeah.
SPEAKER_00
Well, the other situation is you don't have income protection. Maybe you don't know about it, maybe you've never considered it.
SPEAKER_01
Or maybe you thought that ACC will cover for that.
SPEAKER_00
That's correct.
SPEAKER_01
Whatever leveries you're paying.
SPEAKER_00
And this brings up an interesting uh statistic or fact as well. Is I think a lot of people just naturally think if something's gonna happen to them, it's gonna be an injury. I hear that pretty much weekly from clients.
SPEAKER_01
Wow.
SPEAKER_00
I think it's easier to to relate to having an injury, being in a trade or not, it's gonna happen versus I'm gonna get cancer. You don't think of that.
SPEAKER_01
Well, people don't want anything bad to happen to them, right? But you don't rule out that hey, you could be driving and someone could crash into you, or you could trip over and fall off the ladder.
SPEAKER_00
Exactly. But statistically, most long-term income protection claims are due to illness. Of course, there's an exception to that statistic. Hence why it's important to have income protection. But leading back to our whole conversation around ACC, that's why it's super important if you are self-employed, is to get the advice from an advisor. One, to give you the best cover, so you're covered for both injury and illness, and two, to make sure you're not overpaying because you're giving money to ACC where you could be using that towards paying for your insurances. So, anyone out there that's listening, if you're self-employed, aren't aware of the scenario, get in touch because the money's far better in your pocket working for you than ACC.
SPEAKER_01
Yeah.
SPEAKER_00
You wouldn't reduce the ACC cover without doing the insurance piece. That's super important. And I wouldn't do that for anyone because that puts them at risk.
SPEAKER_01
And I remember there was another key point there, Blake, about the ACC cover plus extra was that you
shouldn't miss your payment. Because if you miss your payment on the extra, then it reverts back to the plus.
SPEAKER_00
It's a sneaky one, isn't it? Or something like that. I remember there was a so you've had some good advice, you've taken out income protection, you've reduced your ACC doing it to offset that cost. So now you're set up correctly, and then all of a sudden you miss your invoice on your ACC cover plus extra. Such a mouthful, isn't it? And then ACC just cancel without notice and revert you back to cover plus. And all of a sudden, if you're not on top of your accounts, you might not notice that until that big annual invoice comes in, and all of a sudden you're paying the top uh ACC again, and then all your insurances which you had budgeted differently. Way around it is set up a direct debit so they can't cancel and revert your cover back if you've got a regular payment. That makes sense. Yeah. So there's a lot to understand about ACC, and you've got to be careful when dealing with self-employed people and reducing ACC coverage. I've come across clients over the years who have done it, but they've been given the wrong advice. So, for example, we've got we just used Graham again. He's poor Graham today. Poor Graham. He met an advisor and he was paying the top ACC cover plus. He reduced his cover as the advice said, took out income protection. But on his income protection, he has an exclusion for his left knee, and because he had an ACL replacement. And Graham didn't pick up on it. Then he goes to claim in the future because he falls his knee breaks again. This is just an example, but it's excluded from his policy, his income protection. Now he's got left to rely on his ACC, but that's been reduced right down to the minimum, so it's not sufficient for his needs. So in the circumstance where someone has a pre-existing injury condition, you've got to weigh out the benefits from reducing someone's ACC coverage or not, because it can leave them open.
SPEAKER_01
That's a good point.
SPEAKER_00
And that can happen to people all the time.
SPEAKER_01
Yeah.
SPEAKER_00
So there's a lot to understand, and I would not advise anyone out there to be going to do this without any advice. Because myself doing it for a long time, there's a few pitfalls you have to that that sometimes you might not know until it's too late.
SPEAKER_01
And again, like what we're talking about today, and in general across all of our episodes, is not a personalized financial advice. No, this is generic. And what we're doing is just we're trying to lift people's understanding of what's out there. But if they need anything specific, they should really come and talk to us. Of course, anyone else that they know that could be trusted. Because everyone's situation is different. And what we don't want to do is you say, you know, we don't want them to rush in and change something around and go online and buy cover, but actually not understanding what they're doing. That's right. Please reach out for personalized advice.
SPEAKER_00
Yeah. And there's a couple things to add in that space as well, is once again, to have the importance of a good advisor in your corner who would do this correctly is certain income protection policies that might be recommended need to benefit you, the client, because some income protection policies won't pay in conjunction with ACC, and then some will pay on top of. So having the right policy can maximise the benefits that you will receive. Plain income protection won't pay on top of ACC, so it's only really good for illness cover.
SPEAKER_02
Yeah.
SPEAKER_00
The other one, which I've come across quite a few times over the years, is people naturally get into business, whether your accountant sets you up or you do it yourself, ACC
will give you a CU code, and that is in line with your occupation. I was dealing with someone when I was reviewing their situation and they had the incorrect CU code. Meaning when they started they were doing renovations, now they're selling properties. And what's happened is because ACC now is privy to that, there's been a huge shortfall they've had to pay to ACC because they weren't paying the correct money. So all these sorts of things are super important to make sure when you set yourself up in business, once again you get good advice and that you're set up with ACC correctly.
SPEAKER_01
Yeah.
SPEAKER_00
If you're unsure, ring ACC and ask for your CU code.
SPEAKER_01
Love it.
SPEAKER_00
Receive an email stating what your CU code could be, because then you've got it in writing.
SPEAKER_01
Love it. Yeah. Love it.
SPEAKER_00
Honestly, these things happen more than you think. And no one wants to be on the receiving end of an extra invoice to ACC for the last five years because you can imagine what that could look like.
SPEAKER_01
So and I know IRD and ACC and government agencies, they are all tightening up.
SPEAKER_00
Yeah.
SPEAKER_01
They're all trying.
SPEAKER_00
I'll pinch pennies, yeah.
SPEAKER_01
Well, times are hard, right? Times are hard, apparently.
SPEAKER_00
Yeah.
SPEAKER_01
Yeah. So um, so yeah, I I always go back to the belief of that we're all in charge of our own destiny, yeah. And how we only we can do better for us financially. No one else is coming to save us.
SPEAKER_00
That's right.
SPEAKER_01
And you gotta reach out to the people that if you need help, if you need financial help, reach out to financial advisor. If you need insurance help, reach out to insurance advisor, if you need proper accounting help or ACC or whatever. Like, you should know these things. Don't wait for someone to come and knock on your door and be like, hey, you know, we because we we physically don't have that capacity to be going door by door. And when we do that, people look at us and shut the door in our face, right? So we don't do that. So I always believe that this is our job, this is our mission to give people the information to empower them. And if we can empower them, then they've got, oh, okay, I actually heard that on that podcast. Let me now go and do something about it.
