In today’s economy, more and more people are opting for independence in their career - in fact, 30,000 more Kiwis became self-employed last year. If you’ve chosen to go it alone- whether you’re a tradie, want to set up your own small business, or are freelancing in a creative industry - you might be wondering if options such as income and mortgage protection or redundancy cover are available or suitable for you, and if health-related forms of cover such as trauma (critical illness) insurance are worth your while. We’ve put together some information on what type of cover is available to you when you’re self-employed, freelancing or contracting.

How does ACC work when I’m self-employed?  

Before looking at forms of insurance, it’s a good idea to be aware of the safety net that is already available to everyone in New Zealand - ACC. When you make a successful claim, ACC will pay 80% of your weekly income (provided you earn between the minimum and maximum liable income), as well as rehabilitation costs and additional expenses. 

It’s important to note that ACC only covers “injuries”. Injuries include accidents, assaults, and health conditions that develop due to your work, but ACC doesn’t cover many other common situations where you’re prevented from earning a living.  

Being familiar with what is and what isn’t covered can become particularly relevant if you work in a physical job: ACC cases that hit the media are frequently instances where people have to argue their case to ACC about whether their work caused a debilitating condition.  

Here’s a list of things that aren’t covered:  

• Mental illnesses and emotional problems (unless they spring from a recognised “injury” such as a sexual assault, workplace accident or a traumatic car accident).

• Conditions that develop slowly, such as gradual onset blindness, back problems or carpal tunnel syndrome (unless you can prove those injuries are related to work).

• Contagious illnesses (unless you were exposed to them as a result of your work: nurses who contract Covid-19 from their patients, for instance, can receive ACC pay-outs).

• Any other condition that keeps you out of work for a long period of time, such as cancer or chronic fatigue syndrome (unless you can prove your work environment caused the issue).

If you are in the situation where you need to make an ACC claim, it’s a good idea to have a paper trail, including a record of any workplace incidents that caused, or may have caused, your injury or condition.  

When you’re self-employed, you face the additional complication of not having a guaranteed income. Someone employed by a boss can easily prove what their salary or weekly wage is, but your pay may fluctuate from month to month or from season to season. ACC CoverPlus and CoverPlus Extra exist for this reason – anyone self-employed in New Zealand is automatically placed on CoverPlus. You will be paid 80% of your taxable income, based on the last 12 months.  

CoverPlus Extra is optional, and functions more like an insurance policy: you get to pick the amount you want to receive should you make a successful claim (as long as it’s between $29,453 and $104,729 per year). However, to get this form of cover you will need to pay higher levies. For more information, explore ACC’s info page.

About health, trauma and total permanent disability insurance:

Health insurance: The advantage of health insurance over ACC is it covers all sorts of common conditions, regardless of how they’re caused. The downside is if you take out health insurance and sustain an injury that your insurer believes ACC should cover, you will first have to make a claim and then prove that you’ve been declined. 

Some providers of health insurance will advocate to ACC on your behalf. When you have exhausted your options with ACC, your insurer will step in and provide the cover outlined in your policy.   If your ACC claim is successful, you might still be able to "top-up" your claim using your health insurance, depending on the terms of your policy. 

Trauma (critical illness) and total permanent disability: Trauma insurance is designed for serious health conditions that could knock you out of work for a long period of time, or for good. Policies will generally clearly stipulate which conditions they cover. Some common conditions which usually aren’t covered by ACC, are:

• Cancer

• Stroke

• Motor neurone disease 

• Multiple sclerosis

• Parkinson’s disease

• Coma

• Dementia

Trauma insurance may be offered as a stand-alone policy, or in a bundle with your life insurance. Generally, you will be paid a lump sum to help you and your family get through the situation, though in some circumstances you can get more than one payment as your condition progresses. Check with your insurer exactly which illnesses are covered, and if any exclusions apply.

TPD is also usually paid in a lump sum and covers situations where you are permanently disabled: whether this is total disablement or partial disability (loss of movement in a limb, loss of vision in an eye).

You can generally spend your TPD payment any way you want, including on day-to-day expenses, home help, rehabilitation or even a family holiday. Depending on your policy, you might also get a benefit to make the necessary modifications to your home or car.

If your income relies on you being physically fit and well, then both trauma and TPD could provide you and your family with a safety net should things go wrong. However income protection, discussed below, will also provide you with ongoing support for a longer period of time.

About income protection, mortgage protection and redundancy insurance

Unfortunately, if you've taken charge of your own career by becoming self-employed redundancy insurance probably won’t be an option for you. You can however take out income protection, and mortgage protection insurance. Income protection is negotiated with your insurer and is frequently based on your income in the last three years.

Income protection provides cover if you have to leave work due to an accident or illness (and this can include anxiety, depression, degenerative conditions and stress-related problems, and other issues ACC doesn’t cover). You can choose the length of time you want income protection for: it might be several months, or several years. As with other forms of insurance, your age and level of risk (for instance whether you work in a high-risk environment, whether you have pre-existing health problems) will factor into the price of your premiums.

If the reason you have to leave is an “injury” for the purposes of ACC (such as a car accident or an injury arising from your work) your income protection will also be offset against your ACC payments. Frequently, providers will insure you for 75% of your weekly income. Therefore, if ACC covers you for 80%, you won’t receive anything from your insurer. If your income is significantly higher than the maximum liable income for ACC, the good news is your income protection payments may kick in.

Something to be aware of is whether your policy stipulates you have to be unable to work in your own occupation, or any occupation, before you receive a pay-out. If you’re self-employed and have a specialist set of skills, then “any occupation” won’t be ideal for you - as rather than paying out, your insurer may be able to say you could return to another job within your skill set, but below your pay grade. Always check the fine print, and look for any possible exclusions in your policy.

Mortgage protection is a related form of insurance that does what it says: it’s a form of insurance designed to pay your mortgage payments during an absence from work, due to illness or injury. Generally, mortgage protection does not get offset against your ACC income support payments , meaning you can receive both - however make sure you double check with your provider, to ensure this is the case.  If you’re interested in taking out a mortgage protection policy, you might have also been considering life insurance. Your level of life insurance should be sufficient to cover all your debts, including your home loan, after you die.

Next steps

If you’re self-employed, freelancing or contracting, and you want to take out any form of insurance relating to your health, mortgage or income, Quashed can put you in touch with an adviser with relevant expertise today. Just sign up to our free platform, and you will be able to make an appointment to speak to an independent insurance adviser - it’s completely free, with no obligations or strings attached!

If you decide to take out a policy relating to your health, or income/mortgage protection, don’t forget to upload it to Quashed! Use our Explore tool to delve more deeply into the different types of insurance available in New Zealand.