ACC vs income protection insurance - what's the difference?
While the dream is to work in a job you love, there’s no denying that many people wouldn’t turn up without the promise of a pay cheque. And when it’s that important, it’s nice to know there are ways to help protect your income even if you become sick or injured.
That’s where Accident Compensation Corporation (ACC) and income protection insurance come in. They’re similar in some ways, but have important differences you need to be aware of if you’re looking to set up a plan B for your income.
What is ACC?
ACC is a government-run agency that’s funded by our taxes.
The point of ACC is to help ensure that anyone who gets injured will still receive income – up to 80% of their pre-injury salary – and have assistance with their related medical costs covered as well.
Keep in mind, that’s only for injuries, as illnesses are generally not covered by ACC.
What is income protection insurance?
Income protection insurance is a policy where you make payments to the provider and should you become ill or injured, that provider then pays you a portion of your income for a set amount of time.
Plus, most policies will give you the option of customising your policy so you can make it best fit your needs. You can choose how long the waiting period is before you start receiving payments, how long you’d get paid for, and more.
Note that income protection insurance and life insurance differ again.
Key differences between ACC and income protection insurance
The biggest difference between ACC and income protection insurance is additional coverage for illnesses.
One study found that in the last five years, one in seven Kiwi households experienced a serious illness event that made them unable to work for three months or more. From cancer to heart disease, there are many serious health challenges that are not covered by ACC but can be covered with income protection insurance.
Here is an easy guide which highlights the main differences between ACC and Income Protection Insurance:
| Features | ACC | Income Protection |
| Covers | Accidents and generally won’t cover illness, except in specific circumstances | Accidents and illness |
| Who Pays? | Government-funded through taxes | Policyholder (private insurance) |
| Income Replacement (up to $ amount) | Up to 80% | Up to 75% |
| Duration of Support | Limited to recovery/assessments | Tailored to policy terms |
How ACC and income protection insurance handle claims
ACC and income protection insurance also have different ways of handling claims.
ACC Claims:
- Payments are capped at 80% of income and may be regularly reviewed for recovery progress
- Not all claims are automatically accepted
- Medical bills are often paid for, and you can access further treatment such as physio appointments and medications all paid for by ACC
- Strict criteria ensure recipients can return to "any suitable work" (not just their previous job, which can make things especially tricky for those in physical roles)
- There isn’t a strict cap on how long a claim will pay out for. ACC will assess long-term injuries and permanent disabilities and make a determination on a case-by-case basis
Income Protection Insurance Claims:
- You will need to provide proof of income and medical evidence supporting your inability to work
- Payout amounts and timing depends on the policy you have in place, which you choose
- Payouts continue based on the benefit period selected
Common ways income protection can come in handy
Income protection insurance offers valuable support for a wide range of people and situations. For certain groups, it can be especially beneficial:
- The self-employed: Anyone self-employed knows how hard it is when you get a cold, let alone something more long-lasting. Without sick leave, income protection insurance can be a solid plan B for longer-term lost income.
- The primary income earners: Family relying on you to pay the bills? Taking care of elderly family members? Insurance can be a good option when you have more than just yourself to look after. It can ensure that, even if the unexpected happens, there’s financial support when you need it most.
To keep yourself and your income covered if the unexpected may happen, learn more about OneChoice Income Protection Insurance today. Consider requesting a quote online to find out more about your options and how to stay protected.
This article is provided for general information purposes only, does not consider your objectives, financial situation or needs and shouldn’t be considered or relied upon as professional or financial advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.
14 Mar 2025