Income Protection for Self-Employed

When it comes to running your own business there is usually no such thing as sick leave. If you have to take a day off due to illness, it is usually yourself that absorbs the cost. In saying that, the odd sick day here and there is probably not going to ruin you financially. However, what happens when you are self-employed and you have to take an extended period off work due to a serious illness or accident? What happens to your biggest asset, your income-earning ability?

In the event of a serious accident, the self-employed have access to ACC which provides business owners with a safety net of up to 80% of their pre-disability income. Note that this 80% is based on your declared income, so if you minimise income for tax purposes e.g. split your income with your spouse, this may leave you severely out of pocket when it comes time to lodge an ACC claim and what happens if you are unable to continue working due to an illness?

As ACC only covers accidents, self-employed works need to ensure they have other means to replace their income should they be unable to work due to an illness. This is where private income protection comes in. By taking out an income protection insurance policy you can select a level of replacement income to receive if you suffer a serious accident or fall ill for an extended period of time, thereby safeguarding not only your future, but the future of all those who reply on you financially.

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To those who are self-employed, it may appear that you are effectively paying twice for income protection; once through your private income protection insurance premiums and again through your ACC levies. The answer is, yes and no.

Private Income Protection

With private income protection, some benefits are offset by what you receive from ACC. For example, if you are self-employed with an annual income of $100,000 and you go on claim due to an accident, ACC will pay you $80,000 (80% of your pre-disability income) and your insurer will most likely not make any payments due to the offset, unless you have taken cover under a benefit which is not offset by ACC payments – which is why it is important to go over your income protection options with an experienced advisor who specialises in designing income protection plans for the self-employed.

If you are self-employed you are lucky enough to be in the position to choose what type of ACC cover applies to you, either ACC CoverPlus or ACC CoverPlus Extra. Under CoverPlus Extra, you have the option to select how much of your income you would like ACC to cover in the event of an accident. This gives you the opportunity to reduce your ACC levies and use the savings towards your private income protection premiums.  

No matter who you speak to regarding your income protection and ACC cover, one important point to realise is that you are more likely to be unable to continue working due to an illness rather than an accident, so making sure you have the right cover in place to protect your biggest asset is worthwhile.

 

Rachael Manson
Rachael Manson
03:27 30 May 20
Alan has been brilliant to deal with and extremely patient as we worked through the changes that we were seeking for our life cover and income protection requirements.
Celia Grigg
Celia Grigg
23:36 21 May 20
Hayley was great, from responding to my initial inquiry to finalising my policy. She provided good information and communicated with me every step of the way - efficient, thorough and friendly. She went above and beyond.
Wang Emily
Wang Emily
01:59 19 Apr 20
Hayley has been very helpful and professional with her insurance services, she is committed to work for the best interest of her clients , friendly to deal with and flexible to suit clients’ requirement. Definitely Recommended!
Toko Ngakiau
Toko Ngakiau
20:19 29 Mar 20
I am very wary of random calls about insurance, but I found Daniel from IronOak to be very transparent and a pleasure to deal with.On all occasions he was able to come out and visit us. He explained in detail what we were looking at, and offered a number of comparisons. HIGHLY RECOMMENDED
Hannah Lawrence
Hannah Lawrence
21:00 15 Mar 20
Hayley was very efficient and always delivered on her promises. She put together a good package for me. I would highly recommend Hayley.
Jay Nimbus
Jay Nimbus
08:11 15 Mar 20
Daniel was great to deal with and made seemingly complicated decisions a lot simpler than I expected. I had been stressing about it for a while, wish I had got in touch sooner. Much thanks!
Annette Page
Annette Page
22:39 01 Mar 20
Prompt, professional, pragmatic advice and service. Many thanks.
CrazySmurf Azrial
CrazySmurf Azrial
11:20 28 Feb 20
Hayley was awesome to deal with, answered all my questions and followed up with me weekly to keep me informed throughout the whole process. It can be daunting but she made the process easy. She was easy to talk to and didn't feel pressured.Thanks Hayley for organising everything and helping me through the whole process.
Paul has helped me to find the best option for my family insurance. He made everything easy.
Trixie Lawton
Trixie Lawton
15:55 25 Dec 19
I found Hayley very pleasant to speak to and was explained everything in great detail and in easy terms
Kayleigh Price
Kayleigh Price
22:12 16 Dec 19
Paul was very easy to deal with and made income protection insurance seem much clearer. He gave sound advice, was efficient, friendly and I would recommend him to anyone.
Sunil Kadri
Sunil Kadri
23:23 01 Dec 19
Paul did alot of work to find the right policy for me, was very patient as I wavered, and even helped me with the right questions to ask of my insurer on their parallel policy. Overall he proved an excellent broker whom I'd gladly recommend, and go back to myself.

 

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