This file is Bob's plain-language reference for the single most important New Zealand nuance in income protection (IP): how the Accident Compensation Corporation (ACC) scheme interacts with private IP cover. ACC is a compulsory, no-fault scheme that covers personal injury by accident but not ordinary illness or sickness, and that boundary is exactly the gap private IP is built to fill. Each section below is self-contained so it can stand alone as a retrieval chunk; figures that move year to year are flagged [VERIFY] rather than stated as settled fact.
What ACC covers: personal injury by accident (no-fault, compulsory)
ACC runs a no-fault accident compensation scheme that covers everyone in New Zealand (residents and visitors) who suffers a personal injury caused by an accident, regardless of who was at fault. The main categories of cover are: personal injury by accident (the core category, for example a fall, a crash, a sports injury, a sudden physical trauma); treatment injury (harm caused by medical treatment); and work-related gradual process, disease, or infection (a narrow category for conditions caused by specific workplace exposures, for example noise-induced hearing loss or certain occupational diseases). When a claim is accepted, ACC can fund treatment, rehabilitation, and (where the injury stops someone working) weekly compensation for lost income. Because cover is automatic and compulsory, an injured New Zealander does not buy ACC and does not choose an insurer; the scheme is funded by levies. For an income-protection adviser the key point is the trigger word "accident": ACC's income support only switches on when incapacity flows from an accidental personal injury, not from a health condition that simply developed.
Source: ACC, "What we cover" (https://www.acc.co.nz/im-injured/what-we-cover) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
What ACC does NOT cover: illness, sickness, ageing, most mental health
ACC's own guidance is explicit that cover requires an accident: it "won't cover things like illness, conditions from ageing and emotional issues." In practice this excludes the conditions that cause most long-term time off work and most deaths in New Zealand: cancer, heart disease, stroke, diabetes, and other illnesses that develop rather than result from a sudden accident. Degenerative and age-related conditions (for example most arthritis and wear-and-tear back conditions) generally fall outside cover. Mental-health and emotional conditions are only covered in narrow circumstances, principally where they are a direct consequence of a covered physical injury or arise from a qualifying traumatic event; a standalone mental illness such as depression or anxiety with no covered-injury cause is not ACC's responsibility. Pre-existing conditions and gradual non-work injuries are also outside scope. This exclusion list is the whole reason private income protection exists in New Zealand: it is the cover for the income loss ACC was never designed to address.
Source: ACC, "What we cover" (https://www.acc.co.nz/im-injured/what-we-cover) and Policywise, "What ACC does not cover" (https://www.policywise.co.nz/resources/what-does-acc-not-cover) · retrieved 2026-06-18 · rights: own-summary · drives: information · status: draft
The illness-vs-injury gap that IP fills
The single most important framing for NZ income protection is that ACC and IP divide the world along an accident/illness line, and most income loss falls on the illness side. People are far more likely to be off work long-term because of an illness than because of an accident. Public commentary on this point commonly cites figures suggesting that disease and illness account for a larger share of impairments than accidents do, which is consistent with cancer and heart disease being the country's leading causes of serious incapacity and death. The exact split varies by the survey and year quoted, so any specific percentage should be treated as indicative rather than precise. [VERIFIED-AI 2026-06-21: ACC's accident-only scope is confirmed: ACC covers injury "in an accident" and "won't cover things like illness, conditions from ageing and emotional issues" (acc.co.nz, "What we cover"), so illness-caused incapacity falls outside ACC. The precise accident-vs-illness share of long-term income loss is not pinned to a single dated source and stays indicative.] The structural conclusion is robust regardless of the exact numbers: a New Zealander who relies on ACC alone is uncovered for the most likely cause of a long income interruption. Income protection is the product that covers inability to work due to any qualifying medical condition, illness as well as injury, which is why advisers describe it as filling the illness gap that ACC leaves open.
Source: Policywise, "What ACC does not cover" (https://www.policywise.co.nz/resources/what-does-acc-not-cover) · retrieved 2026-06-18 · rights: own-summary · drives: information · status: draft
ACC weekly compensation: the 80% rate
When ACC accepts an injury claim and the injury stops someone working, the headline income entitlement is weekly compensation of up to 80% of the person's pre-incapacity (pre-injury) weekly earnings. The 80% figure is the defining number of the scheme and is the figure advisers most often contrast with private IP, which in New Zealand is commonly written at up to 75% of income. Weekly compensation is taxable and is paid net of PAYE and standard deductions, like wages. The 80% is calculated against earnings, so it is only as generous as the person's income record allows; high earners are capped (see the weekly maximum section) and self-employed entitlements depend on declared income (see the CoverPlus section). The practical adviser takeaway is that even where ACC does apply (an accident), it replaces 80% of income up to a cap, not 100%, so there can still be a shortfall to plan around for higher earners.
Source: ACC, "Weekly compensation for employees" (https://www.acc.co.nz/im-injured/financial-support/weekly-compensation/weekly-compensation-for-employees) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
The one-week employer stand-down (first week not paid by ACC)
ACC does not pay weekly compensation for the first week of incapacity. For a work-related injury, the employer is required to pay the employee for that first week (commonly described as 80% of usual pay for the first week), and ACC's weekly compensation then begins from day 8 (the start of the second week of incapacity). For a non-work injury the first week is typically not covered by the employer in the same way and is usually bridged by the employee's own leave (for example sick leave) before ACC compensation starts in the second week. This one-week stand-down matters for IP design because it is a small, defined gap at the very front of an accident claim. It is conceptually different from a private IP waiting period (which is chosen by the client and is often weeks or months long): the ACC stand-down is fixed at roughly a week and applies to accident claims, whereas the IP waiting period is the deductible the client selects on their own policy.
Source: ACC, "Weekly compensation for employees" (https://www.acc.co.nz/im-injured/financial-support/weekly-compensation/weekly-compensation-for-employees) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
Short-term vs long-term rate and how earnings are averaged
ACC calculates the 80% against an averaged measure of pre-incapacity earnings, and the averaging method changes after the first four weeks. For the first four weeks (the short-term rate), a PAYE employee's compensation is generally based on their earnings in the four weeks immediately before the injury. After four weeks (the long-term rate), the calculation shifts to a longer-run average: for a permanent employee this is broadly their income from the job divided by the weeks worked (up to 52 weeks), and for non-permanent or variable workers it is income divided by 52 weeks to reflect irregular patterns. The reason this matters for advisers is timing and smoothing: the short-term rate can differ from the long-term rate for someone whose recent four weeks were not typical (for example after a quiet patch or a busy patch), so the ACC figure a client actually receives can change after the first month. The precise averaging formulas are set out in ACC guidance and the Accident Compensation Act; the summary here is for adviser framing, not for computing a client's exact entitlement. [VERIFIED-AI 2026-06-21: the averaging method is in Schedule 1 of the Accident Compensation Act 2001, clause 33 (gateway/application) and clause 34 (calculations): cl 34(1) is the short-term method (applies to the 4 weeks after the first week of incapacity, averaging the 4 weeks immediately before incapacity) and cl 34(2) is the long-term method (using the 52 weeks before incapacity). Source: legislation.govt.nz Accident Compensation Act 2001, Schedule 1 cls 33-34.]
Source: ACC, "Weekly compensation for employees" (https://www.acc.co.nz/im-injured/financial-support/weekly-compensation/weekly-compensation-for-employees) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
Weekly maximum and minimum (the cap on the 80%)
ACC's 80% is subject to a maximum weekly amount and, for full-time earners, a minimum weekly amount, both of which are indexed and change each year. The maximum is driven by a maximum level of liable earnings: income above that ceiling is not compensated, so a high earner's ACC weekly compensation is capped well below 80% of their true income once they pass the threshold. The minimum rate protects low-paid full-time earners by setting a floor (historically pegged to 80% of the adult minimum wage for a 40-hour week). The exact dollar figures for the maximum and minimum (and the maximum liable-earnings ceiling) are reset annually and differ between sources and tax years, so Bob must not state a current rate as settled fact. [VERIFIED-AI 2026-06-21: as at this date, ACC weekly-compensation maximum = $2,418.55/wk (from 1 Jul 2025) and minimum = $752.00/wk (from 1 Apr 2025, = 80% of the adult minimum wage for a 40-hour week); both reset annually, re-confirm at acc.co.nz before use. Sources: ACC "Changes to client payments" (1 Jul 2025) & (1 Apr 2025).] [VERIFY] the maximum liable-earnings ceiling dollar figure (not confirmed with a clear applicable period). The adviser point that does not move: because of the cap, the higher a client's income, the bigger the gap between their real income and what ACC would pay, which strengthens the case for private cover even for accident risk, not only illness risk.
Source: ACC, "Weekly compensation changes for full-time earners" (https://www.acc.co.nz/newsroom/stories/weekly-compensation-changes); ACC weekly compensation (https://www.acc.co.nz/im-injured/financial-support/weekly-compensation); indexation under the Accident Compensation Act 2001 (https://www.legislation.govt.nz/act/public/2001/0049/latest/DLM99494.html) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
Abatement: part-time return to work reduces ACC payments
ACC weekly compensation is designed so that a claimant does not end up better off than before the injury. If a person returns to part-time work or lighter alternative duties while still recovering, ACC applies abatement: the compensation is adjusted so that earned income plus ACC compensation does not exceed what the person earned before the injury. Earnings during a claim must be reported, and unreported income can create an overpayment the claimant has to repay. Compensation generally stops when the person returns to the job they did before the injury or is assessed as fit to do so. Abatement is the ACC-side mirror of the over-insurance principle that also governs private IP: both systems are built to top up toward, but not beyond, pre-incapacity income. For advisers, abatement explains why a graded return to work changes the ACC figure mid-claim, which in turn changes how much a coordinated IP benefit (if any) would need to contribute.
Source: ACC, "Weekly compensation for employees" (https://www.acc.co.nz/im-injured/financial-support/weekly-compensation/weekly-compensation-for-employees) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
ACC for the self-employed: standard CoverPlus
A self-employed person or contractor is automatically placed on standard ACC CoverPlus. If an accident stops them working, CoverPlus pays weekly compensation of up to 80% of their taxable income, based on their most recently completed financial year of declared earnings. Two features make CoverPlus weaker than it looks for many self-employed clients. First, it is backward-looking and income-proven: the payout is tied to what was declared last year, so a newly self-employed person with little or no earnings history, or someone whose declared income was low, can find their cover is small. Second, like all ACC cover it only responds to accidents, not illness. So a self-employed client on CoverPlus alone has two gaps at once: the illness gap (no cover for sickness) and a potential earnings-evidence gap (cover pegged to last year's declared income). Both gaps are central to the IP conversation for self-employed clients.
Source: ACC, "Cover for self-employed" (https://www.acc.co.nz/for-business/understanding-your-cover-options/types-of-cover-for-self-employed) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
ACC CoverPlus Extra (CPX): agreed cover for the self-employed
CoverPlus Extra (CPX) is optional ACC cover that a self-employed person or non-PAYE shareholder-employee can choose instead of standard CoverPlus. Instead of basing payments on last year's declared income, CPX lets the person negotiate an agreed level of cover up front, within a set minimum and maximum band. If they have an accident and cannot work, ACC pays an agreed amount (up to 100% of the chosen cover under the full-compensation option) without the person having to prove their loss of earnings, and payments can start without the same evidence delays as standard cover. CPX suits people with fluctuating or seasonal income, the newly self-employed with no earnings history, and people who want certainty about exactly what ACC will pay. The specific minimum and maximum cover amounts (and any reduced-compensation options) are reset each year and are levy-priced, so Bob must not quote a cover band or any levy figure as current. [VERIFIED-AI 2026-06-21: the CPX agreed-cover band is $40,401 (min) to $125,313 (max) for 1 Apr 2026 to 31 Mar 2027 (resets annually); the full-compensation option pays 100% of agreed cover. Levy pricing must still never be quoted. Source: ACC "CoverPlus Extra (CPX)".] Still accident-only: CPX changes how much and how certainly ACC pays for an accident, but it does nothing for illness, so it does not remove the need for private IP.
Source: ACC, "CoverPlus Extra (CPX)" (https://www.acc.co.nz/for-business/understanding-your-cover-options/optional-cover-coverplus-extra-cpx) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: information · status: draft
How IP offsets against ACC (you cannot stack both to over 100%)
Private income protection in New Zealand is written to coordinate with ACC rather than pay on top of it. Most IP policies contain an ACC offset (sometimes called an integration or social-security offset): any ACC weekly compensation the client receives for the same period of incapacity is deducted from the IP benefit. The result is that a claimant cannot collect ACC's 80% and a full IP benefit at the same time and end up above their pre-disability income; the IP benefit fills the shortfall rather than duplicating ACC. In practice, for an accident where ACC pays 80% up to its cap, an IP policy with an offset would pay little or nothing while ACC is paying, except where the client's income sits above the ACC cap, in which case IP can top up the part of income ACC does not reach. The offset is why advisers stress that IP is not "double cover" for accidents: for accidents it is mostly a top-up over the ACC cap, while its real, undiluted value is for illness, where ACC pays nothing and the IP benefit is not offset by any ACC payment.
Source: MoneyHub, "Income Protection Insurance" (https://www.moneyhub.co.nz/income-protection-insurance.html) and Policywise, "What ACC does not cover" (https://www.policywise.co.nz/resources/what-does-acc-not-cover) · retrieved 2026-06-18 · rights: own-summary · drives: information · status: draft
Why offsetting exists: the over-insurance / anti-double-dipping principle
The ACC offset is one expression of a general insurance principle that income-replacement cover should restore lost income, not create a profit from being unable to work. If a person could draw ACC's 80% and a full separate IP benefit at the same time, the combined payment could exceed their working income, which would both encourage staying off work and breach the indemnity logic that underpins income cover. So insurers coordinate IP with other income-replacement sources, ACC, employer sick pay, and Work and Income (WINZ) benefits, by offsetting them against the IP benefit so the total does not exceed the insured proportion of pre-disability income. This is the private-insurance mirror of ACC's own abatement rule. The two systems use different mechanics (ACC reduces its payment as you earn; IP reduces its payment by what ACC pays) but share the same ceiling: roughly the client's pre-incapacity income. Bob should never imply a specific claim outcome, but it can explain that this coordination is by design and is why a client cannot simply add ACC and IP percentages together.
Source: MoneyHub, "Income Protection Insurance" (https://www.moneyhub.co.nz/income-protection-insurance.html) · retrieved 2026-06-18 · rights: own-summary · drives: information · status: draft
Indemnity vs agreed-value IP and how each meets ACC
How an IP policy is structured changes how cleanly it sits alongside ACC. Indemnity (loss-of-earnings) cover pays the lesser of the sum insured or a set percentage (commonly up to 75%) of the client's actual income at the time of claim, so income must be proven at claim time and the benefit can shrink if income fell before the claim. Agreed-value cover fixes the benefit when the policy is taken out (income is proven up front), so at claim time the client receives the agreed amount without re-proving income, even if recent income dropped. Either way, the ACC offset still applies: ACC payments are deducted from the IP benefit regardless of whether the policy is indemnity or agreed value. The reason this pairing matters for self-employed clients especially: their income can be lumpy, so agreed-value IP can give certainty that mirrors what CPX gives them on the ACC side, and a client may deliberately combine the two so that accident risk (CPX) and illness risk (agreed-value IP) are both covered with predictable amounts. [VERIFIED-AI 2026-06-21: the ~75%-of-income indemnity cap is confirmed against published NZ insurer IP wordings: Partners Life Income Cover (indemnity loss-of-earnings) pays pre-disability income x 75% or the sum insured, whichever is lesser; Fidelity Life and AIA NZ Real Income Protection state the same 75% indemnity cap. The exact live maximum for a given insurer and tax year should still be confirmed against current product terms. Sources: Partners Life, Fidelity Life, AIA NZ published IP PDS/policy wordings.]
Source: MoneyHub, "Income Protection Insurance" (https://www.moneyhub.co.nz/income-protection-insurance.html) · retrieved 2026-06-18 · rights: own-summary · drives: information · status: draft
Adviser framing: IP is the sickness complement to ACC's accident cover
The clean way to explain the whole relationship to a New Zealand client is: ACC is the country's accident insurer, and income protection is the sickness insurer that ACC leaves missing. ACC covers income loss from accidents at up to 80% of earnings to a cap; it pays nothing for illness. Income protection covers income loss from any qualifying medical condition, which is mostly valuable for the illness side because the ACC offset means IP largely tops up rather than duplicates ACC on the accident side. So the products are complementary, not competing: most clients who want genuine income security hold both, with the IP policy doing its undiluted work when the cause is sickness. This framing also clarifies the high-earner case (where even for accidents ACC's cap leaves a gap IP can fill) and the self-employed case (where CoverPlus may be thin and illness is entirely uncovered). Bob presents this as the standard adviser framing for education; it is general information, and any individual recommendation sits with the licensed adviser in the loop.
Source: MoneyHub, "Income Protection Insurance" (https://www.moneyhub.co.nz/income-protection-insurance.html) and Policywise, "What ACC does not cover" (https://www.policywise.co.nz/resources/what-does-acc-not-cover) · retrieved 2026-06-18 · rights: own-summary · drives: advice · status: draft
Self-employed: how ACC cover choice changes the IP need
For self-employed clients the ACC setup directly shapes how much IP they need, so the two should be reviewed together. A self-employed person on standard CoverPlus has accident cover pegged to last year's declared income, which can be low or evidence-thin, and zero illness cover; their IP need is therefore often larger and more urgent than an employee's. A self-employed person who moves to CoverPlus Extra gains certainty and an agreed amount for accidents, which can let an adviser size the illness-focused IP benefit more precisely (and, in some structures, hold a deliberately lower ACC cover where private IP carries more of the load, a levy-versus-premium trade-off that is an adviser decision, not something Bob prices). The general point Bob can make: a self-employed client's ACC cover type (CoverPlus vs CoverPlus Extra) and their income evidence are both inputs to the IP conversation, and reviewing ACC and IP in isolation risks either a gap (relying on thin CoverPlus plus no illness cover) or wasted overlap (over-buying where CPX and IP both target the same accident risk). Specific levy and premium trade-offs are out of scope here and are an adviser decision. [VERIFY]
Source: ACC, "Cover for self-employed" (https://www.acc.co.nz/for-business/understanding-your-cover-options/types-of-cover-for-self-employed) and ACC, "CoverPlus Extra (CPX)" (https://www.acc.co.nz/for-business/understanding-your-cover-options/optional-cover-coverplus-extra-cpx) · retrieved 2026-06-18 · rights: public-govt-attribution · drives: advice · status: draft