Income Protection vs ACC (2024 Comparison)

ACC cover accidents only; income protection insurance covers any medical condition.

Income Protection or ACC: what is better?

Income protection insurance is better because it covers any medical condition that prevents you from working, including injuries, illnesses, and mental illnesses, while ACC only covers injuries. 

Secondly, ACC weekly payments are capped at $2,257, while personal income protection has no limit.

Income Protection or ACC: An Overview

The Accident Compensation Corporation (ACC) cover and income protection insurance pays an income if you can’t work, but choosing the right one is vital to protect your household finances.

ACC is government insurance that pays for treatment and loss due to an accident. It will pay towards medical services, operations, up to 80% of salary and a death benefit to dependents. ACC covers accidents only.

Income protection insurance pays up to 75% of salary, vocational retraining and rehabilitation costs, and may also include death benefit, child care and a Partial Disability benefit.

Key Points

  • ACC covers only accidents. It does not cover you if you get sick and cannot work (think cancer, heart attack, etc.).
    Compensation is capped at 80% of your income, up to $2,257 weekly.
  • ACC is a government-funded benefit that pays for treatment and compensates you for financial loss if you’re injured, can’t work, and/or need medical care.
  • ACC primarily funds treatment and pays salary benefits for injured individuals taking time off work.
  • Personal income protection pays out if you are medically unfit to work due to any
    • injury,
    • accident,
    • burnout, or
    • depression.
    • Compensation is capped at 75% of your income.
  • LifeCovered helps you evaluate all your Income Protection Insurance options. Insurance costs range from around $500 to $1,000 a year to a lot more (depending on the amount insured and how long you’ll be paid while you’re unable to work).
  • Our advice is free or charge, as we are paid by the insurer. Advisor fees are always built into the insurance payments, whether you use an advisor or not.
Income Protection vs ACC

Income Protection vs ACC: comparison chart

I frequently converse with New Zealanders about ACC and Income protection Insurance. Many are confused about the scope of coverage provided by ACC and how it differs from income protection insurance.

Even if they look similar, each provides very different benefits.

Firstly, ACC only covers injuries; it doesn’t cover illnesses. 

The majority of people who are absent from work long-term are suffering from an illness, not injuries.

In fact, about 80% of our income protection claims are illness-related, while the remaining 20% are accident-related.

ACC’s list of covered injuries is published here.

Income Protection ACC Mortgage Protection

Accident Cover
Injury, sprains, fractures, etc

Illness Cover
Cancer, stroke, disease, etc

Mental Health Cover
Stress, depression, anxiety, etc


Taxes, ACC, other income, etc

Redundancy Cover
Pays if you're let go...

Degenerative Disease
Pays if you're let go...

How does Income Protection work?

Because your earning power may be one of your greatest financial assets, protecting it as much as possible makes sense. Income Protection provides an alternate source of income if an accident or illness prevents you from working.

You will receive up to 75% of your pre-disability income. 

How does ACC work?

ACC is an accident compensation scheme that came into operation in 1974. It provides 24/7 ‘no fault’ injury cover, and helps New Zealanders, including overseas tourists, who suffer an accident either at work, home or play.

Depending on the injury or accident, ACC can assist with:

  • the cost of medical treatment, and other rehabilitation services
  • weekly income, after 1-week standdown – up to 80% of your usual income
  • special equipment to help the injured person get by at home or work
  • programmes to help the injured person get back to work, or to live independently

Cover levels are based on up to 80% of your income and a maximum of $2,257.17 in weekly taxable compensation.

The payouts are intended to help cover essential outgoings, such as rent or mortgage, although you probably won’t be asked about these when applying.

If this sounds a little too low, don’t forget that if you’re employed, your employer must pay you statutory sick pay – whether you have any income protection.

ACC is funded by levies (premiums) paid by the self-employed, employers, and employees based on the risk associated with their industry. Redundancy and sickness, including mental illness, are not covered.

ACC will cover

  • Personal injury caused by accident
  • Work-related gradual process disease or infection
  • Treatment injury
  • Mental injury caused by:
    • sexual abuse or sexual assault
    • sudden traumatic event in the workplace
    • physical injury

Acc does not cover

  • A non-occupational gradual process, injuries, disease or infections
  • Ageing process
  • Illness, unless work-related (for example, cancer for firemen, asbestos-related illness, and leptospirosis),
  • Injury to teeth arising from their natural use
  • Hernia by coughing or sneezing
  • Stress (unless related to sexual abuse, personal injury or traumatic event at work)
  • Redundancy cover

I don't need income protection because ACC covers me?


137,939 people got weekly payments in 2022 because their injuries prevented them from working. However, 37,742 applications were rejected, a part of those most likely pre-existing conditions.

Such many rejected claims lead to disputes and complaints, as described in this story and this family’s devastation after ACC denies payout over missing signature.

If your ACC claim is accepted, the organisation will pay up to 80 per cent of your pre-disability wage, up to $2,257.17 in weekly taxable compensation, and for your medical expenses, provide rehabilitation treatments such as physiotherapy, medication, and housing modification until you can return to work.

ACC enforces regular reviews of people on a claim to assess when individuals may return to any “work.” This includes any employment, not just the one you held before the accident.

If you were earning $100,000 as an IT programmer and an injury prevented you from working long hours on a computer, ACC would expect you to find a job that you could do even if it paid less. ACC, like Jobseeker Support, is an emergency benefit, not a lifestyle entitlement.


Income Protection vs ACC: Ready to choose?

If you’re self-employed or running a small business, your income likely fluctuates from year to year.
ACC payouts are based on 80% of your income for the previous 12 months, so a bad year could adversely affect your compensation.

Your accountant may also split your income with your spouse for tax purposes, which can affect the income ACC will use to calculate any benefits you may be eligible for.
You can agree to a fixed income with ACC in conjunction with income protection insurance, reducing the levy you pay to ACC

Income Protection vs ACC: Ready to choose?

Income Protection and ACC can work together to provide your and your family financial peace of mind with comprehensive income protection insurance, that covers any medical event, including accidents, injury or mental illness. 



What does ACC not cover?

Your injury must be because of an accident. ACC won’t cover things like illness, conditions from ageing such as degeneration, or emotional issues.

Sometimes, injuries aren’t caused by an accident. ACC doesn’t cover:

  • Illness, sickness, or contagious diseases, e.g. measles or a virus such as COVID.
  • Stress, hurt feelings or other emotional issues, unless they’re linked to an injury, ACC already has covered.
  • Conditions related to ageing, e.g. arthritis, degeneration.
    Most hernias.
  • Injuries that happen over time, unless an activity at work is causing it.
  • Damage to items that don’t replace body parts includes hearing aids, glasses, pacemakers and gastric bands.

The following are some of the injuries and medical conditions that are generally not covered by ACC:

  • Emergency hospital visits for appendicitis
  • Skin burns caused by the sun, wind or snow
  • Unexplained back pain that worsens over time.

What's the maximum weekly ACC compensation?

From 1 April 2024, the minimum weekly compensation rate is 80% of the adult minimum wage for a forty-hour week, which is $926. Therefore, the minimum weekly compensation rate payable is $740.80; the maximum is up to 80% of your salary, $2,257.17 per week.

If an injury causes your death, ACC will pay a benefit to your family (dependant, spouse and funeral payments are outlined here).

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Author Bio:

I love to write and educate about financial protection. I’ve worked in the insurance industry since 2004, both in Scandinavia and New Zealand, and I hold dual citizenship.

Over the years, I’ve helped my people with life, health, and income protection and, most importantly, assisted when tragedy or illness has happened.

I’m a registered financial advisor with the Financial Markets Authority – check my registration here.

To back up my practical experience, I have the New Zealand Certificate in Financial Services (NZCFS Level 5) in Life, Health, and Disability and the (NZCFS Level 5) Investments strand.

Connect with me here on LinkedIn.