Are there any risks of changing to The ACC Alternative?
When you change to The ACC Alternative you are essentially reducing your ACC Accident Only Cover and adding Income Protection Insurance to ensure that you’ll be covered for accidents and also continue to be paid if you are unable to work due to illness. Considering you’re 2.6 times (or 260%) more likely to be off work for six months or more following an illness rather than an accident (Source: Financial Services Council NZ), this is a sensible move. However there are two things that you should be aware of:
- With the quoted price there is a minimum 30 day (there are varying wait periods available) stand down period before you’ll start receiving the income protection compensation.
- Income protection covers you for all accidents and illnesses (that could be anything from cancer, strokes and heart attacks to mental health issues like stress and anxiety) but it does not cover you for death. ACC covers death if it’s caused by an accident.
1. Income Protection 30 Day Stand Down period.
On traditional ACC if you have an accident, ACC will start paying you compensation after a two week stand down period (provided you’ve given them your up-to-date accounts. If you don’t have the accounts ready, the stand down period could be much longer). After the stand down period, with full cover ACC, you’ll be paid 80% of your wage.
But, if you are sick you will be paid nothing!
If you have The ACC Alternative you’ll start receiving compensation from ACC after the two weeks but because you’ve reduced your ACC cover you will be paid a minimum of $472 a week for 2 weeks. After 2 more weeks you’ll start to receive your Income Protection Insurance on top of the ACC compensation at a total rate of around 81% of your wage. You will continue to receive 81% of your wage for as long as you are unable to work.
If you are sick you are not eligible for the ACC Accident Only portion but The ACC Alternative will still pay you 75% of your income, every month, until you return to work.
If your policy states Payment Period 5 years, you will receive payments for up to five years per claim. If after five years you return to work for 12 months, but your condition is persistent, you can claim for another 5 years for the same condition.
Note: You can opt for a 2 week stand down for Income Protection as well, although this is usually not the most cost effective option. There is also options of 30 day, 60 day, 26 week and 52 weeks. Which can be more cost effective based on circumstances or needs. One of our specialist advisers can help you with this.
2. Accidental Death
Income Protection Insurance does not cover accidental death but ACC does. In the unlikely event of death caused by accident, your spouse will still receive compensation, but because you’re reducing the amount of ACC cover it will not be as much. If you have children we recommend that you consider life insurance.
Call us now for a quote on 0800 4 222 258.