ACC vs income protection: Differences and why you need both

What ACC and income insurance have in common

ACC and income protection insurance both protect your income if you cannot work because of a debilitating health event.

Their shared goal is simple: to help you keep paying everyday costs while you recover, including:

• Mortgage or rent
• Groceries
• Utilities
• Childcare
• Transport
• Debt repayments
• Other household bills.

Each pays a regular benefit based on your income before you stopped working.

Where ACC and income cover differ

The biggest difference is in what causes a claim.

• ACC is designed for accidental injuries
• Income protection insurance can cover illness and injury, subject to your policy terms.

ACC compensation

ACC weekly compensation is generally up to 80% of your pre-injury income, before tax and deductions.

However, ACC payments are subject to:

• ACC eligibility rules
• Your employment type
• Your income history
• Maximum compensation caps
• Any income you earn while recovering.

For employees, ACC calculates payments based on your income before the injury. Your payment may also change if you return to work on reduced hours or alternative duties.

For self-employed people, ACC calculations can be more complex. Payments may depend on your filed income with Inland Revenue.

There is also CoverPlus Extra, an optional ACC product for eligible self-employed people.

As of 1 April 2026 to 31 March 2027, CoverPlus Extra lets you choose an agreed cover amount between $40,401 and $125,313. This can give more certainty if your income fluctuates.

ACC does not cover:

• Illnesses such as cancer, heart disease, or stroke
• Most mental health conditions
• Degenerative issues
• Aging-related conditions
• Redundancy
• Many gradual health problems.

Nor does ACC pay for:

• Treatment unrelated to your covered injury
• Treatment for pre-existing conditions not caused by the injury
• Treatment overseas
• Treatment from unregistered providers.

Income protection cover

Income protection insurance usually lets you insure up to a percentage of your income, often around 75% of your pre-disability income, depending on the insurer and policy.

The payment style is also different:

• ACC usually pays weekly
• Income protection insurance usually pays monthly.

Income protection can be especially useful if:

• Your income is higher than ACC’s limits
• You are self-employed
• Your income changes from year to year
• You want cover for illness as well as injury.

Waiting periods before payments begin

ACC weekly compensation usually starts from day 8 after your injury, once ACC has accepted your claim and confirmed you are eligible.

ACC usually does not pay for the first week off work. What happens in that first week depends on how you were injured:

• Work injury: your employer usually pays 80% of your usual pay for the first week
• Non-work injury: you may need to use sick leave, annual leave or savings
• Self-employed: you may need to rely on savings or business cash flow.

Income protection insurance works differently.

You choose a waiting period when you set up your policy. Common options may include 4, 8 or 13 weeks, depending on the insurer.

A shorter waiting period usually costs more. A longer waiting period may reduce your premium, but you will need enough savings, paid leave, or other support to cover the gap.

Benefit payment duration

ACC weekly compensation may continue while you are unable to work because of a covered injury and if you continue to meet ACC’s requirements.

For a temporary injury, ACC may pay until you recover enough to return to work.

If you return to work on reduced hours or alternative duties, ACC may adjust your payments.

For long-term or permanent injuries, ACC may provide ongoing support. The type and length of support depends on your injury, assessments, and eligibility.

If you are receiving NZ Superannuation and have CoverPlus Extra, your weekly ACC compensation may be limited to a maximum of two years per claim.

Income protection insurance pays according to the benefit period you chose when you bought the policy.

Depending on the policy, this could be:

• 2 years
• 5 years
• To a certain age, such as 65.

Payments usually stop when:

• You recover
• You return to work
• You reach the end of the benefit period
• You reach the policy expiry age
• You no longer meet the claim definition.

What else ACC may cover

ACC is not just income support.

For a covered injury, ACC can help with:

• GP visits
• Emergency department treatment
• Physiotherapy
• Prescriptions
• Surgery
• Other approved treatment
• Rehabilitation
• Equipment
• Transport
• Help at home
• Workplace support
• Housing modifications
• Return-to-work support.

In some situations, ACC also provides support after a fatal injury. This could include funeral grants and support for eligible dependants.

What else income protection may cover

Income protection insurance focuses on replacing income; however, many policies also include built-in or optional benefits that provide extra support.

Depending on the insurer and policy, this might include:

• Partial disability benefits
• Rehabilitation support
• Return-to-work support
• Specific injury benefits
• Recurrent disability benefits
• Nursing care benefits
• Bed confinement benefits
• Waiver of premium while you are on claim.

Some policies also support mental health claims, subject to the policy wording and any exclusions. This is an important point because ACC usually does not cover mental health conditions unless they are linked to a covered injury or specific qualifying event.

Some income protection options also help you continue contributing to KiwiSaver while you are unable to work, keeping your retirement savings on track.

Income protection does not usually cover funeral costs. However, some policies may include a small death benefit, depending on the insurer. If funeral costs are a concern, life insurance may be a better fit.

Talk to Policywise and compare policies carefully. The cheapest policy is not always the best option if it has weaker definitions, fewer built-in benefits, or exclusions that matter to you.

Can you claim ACC and income protection at the same time?

Yes. However, you generally won't receive the full benefit from both.

How does this work?

For an accident claim:

• ACC usually pays weekly compensation first
• Your income protection insurer then works out whether an additional payment is needed
• If ACC pays less than your insured benefit, your insurer may top up the difference
• If ACC already pays more than your insured benefit, there is usually no additional payment from your insurer.

Example:

If you're unable to work because of an illness rather than an accident, ACC generally won't provide weekly compensation. In many cases, your income protection policy may instead pay the full insured benefit, provided your claim meets the policy terms.

While most insurers apply an ACC offset, the exact rules vary. Policywise can help you compare policies and understand how different insurers calculate benefits.

When can income protection be more valuable than ACC?

Income protection can be especially helpful when ACC does not apply, does not pay enough, or does not match your household needs.

It may be worth considering if:

• You want cover for illness: ACC generally relates to accidental injuries. Income protection may cover illnesses, such as cancer, heart disease, stroke, or some mental health conditions, subject to your policy terms.
• You earn above ACC’s cap: ACC payments are capped, so higher earners may receive less than 80% of their actual income. Income protection can help reduce this gap.
• You are self-employed or a contractor: ACC payments may depend on filed income. This can be tricky if your income changes, your tax return is outdated, or your business still has expenses while you are off work.
• Your ACC claim is declined or limited: Some claims may not qualify, especially if ACC decides the condition is not caused by a covered accident. Income protection may still help if your condition meets your policy wording.

Tip: Some people combine income protection with mortgage protection. Income protection helps with everyday living costs, while mortgage protection helps cover mortgage or rent payments. This can suit families, homeowners and people with larger financial commitments.

A Policywise adviser compares options across leading insurers and helps you choose cover that fits your income, family and budget, without paying for protection you do not need.

Helping you pick the right safety net

Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice and quotes, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

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