Does ACC cover you if you can't work?

ACC (the Accident Compensation Corporation) covers you if you're injured in an accident — whether it happens at work, at home, or out on a run. It can replace up to 80% of your pre-injury income (up to a cap) while you recover.

But here's the critical thing: ACC only covers accidents. It does not cover illness.

If you have a heart attack, are diagnosed with cancer, or develop a serious mental health condition that stops you working, ACC won't pay you a cent. And illness — not injury — is the most common reason New Zealanders are unable to work for extended periods.

Tip: Think of ACC as your accident safety net. For illness, disease, or mental health conditions, you need personal insurance — ACC won't fill that gap.

What is income protection insurance?

Income protection insurance pays you a regular income if you can't work due to illness or injury. Most policies cover up to 75% of your pre-disability income, paid monthly until you recover or the policy's benefit period ends.

A few key things shape how a policy works:

• Wait period: How long before payments start — commonly 4, 8, or 13 weeks. The longer the wait, the lower your premium.
• Benefit period: How long payments continue — 2 years, 5 years, or to age 65.
• Agreed value vs indemnity: Agreed value locks in your payout when you set up the policy. Indemnity bases it on your income at the time of claim — important if your income changes.

For anyone with a mortgage, income protection is particularly valuable. Missing two or three months of repayments can create real problems with your lender — even if you're not in danger of losing your home.

Tip: Think about how long your savings would genuinely last. That helps you choose the right wait period — and avoid paying for cover that doesn't match your actual situation.

What about mortgage repayment cover?

Mortgage repayment cover is a more targeted type of insurance. It covers your mortgage repayments — and only your mortgage repayments — if you can't work. It's simpler and often cheaper than full income protection, but more limited in scope.

If keeping the mortgage paid is your main concern, it can be a practical option. But if you also need to cover groceries, utilities, childcare, and other bills, income protection is usually a better fit — it replaces a portion of your income, which you can use for anything.

At Mortgage Mates, we often have this conversation with clients who've just taken out a new mortgage. It's a natural time to review your insurance alongside your home loan — the two are closely connected, and it's worth making sure one doesn't leave the other exposed.

Tip: Ask your adviser to compare mortgage repayment cover and income protection side by side. The right answer depends on your income, savings, and what you'd need to keep running if you were off work.

What if you're self-employed?

If you're self-employed, the stakes are higher — and the gap is bigger.

You don't have sick leave. You don't have an employer who'll keep paying your salary while you recover. If you can't work, your income stops.

Income protection is arguably more important for self-employed people than for anyone else. But it can also be more complex to set up. Policies typically base your claim amount on your income over the previous 12–24 months — so if your business income fluctuates, that affects what you'd actually receive.

There are policies designed specifically for the self-employed, including agreed value options that lock in your benefit regardless of future income changes. Getting the right structure means working with an adviser who understands the nuances involved.

Tip: If your income varies year to year, ask specifically about agreed value income protection. It gives you much more certainty about what you'd receive if you needed to claim.

How long could you really last without income?

It's worth being honest here. Most financial advisers suggest keeping three to six months of living expenses saved as an emergency buffer. But with a mortgage, a car, power bills, school costs, and everything else, six months of savings can disappear faster than you'd think.

The average income protection claim in New Zealand lasts longer than most people expect — often six months to two years. That's a long stretch to be without income.

Tip: Do a quick calculation. Add up your monthly expenses — mortgage, groceries, power, everything — and divide your savings by that number. That's how many months you'd last. Is it really enough?

So, are you actually covered?

For most New Zealanders, the honest answer is: partially. ACC is excellent for accidents, but it leaves a real gap when it comes to illness or long-term conditions. Whether income protection is the right next step depends on your income, your savings, your family situation, and how much risk you're comfortable carrying.

The best thing you can do is sit down with an adviser who'll look at your whole picture. If you'd like to talk it through with the Mortgage Mates team, we offer a relaxed, no-obligation chat — we'll be straight with you about what you genuinely need, and what you probably don't.

Key Takeaways:

• ACC covers accidents only — illness is not covered, and illness is the most common reason people can't work
• Income protection pays up to 75% of your income if you can't work due to illness or injury
• Mortgage repayment cover is cheaper but narrower — income protection is more flexible and covers all living costs
• Self-employed people are most exposed, with no employer sick leave to fall back on
• The average income protection claim in NZ lasts six months to two years — most people's savings wouldn't stretch that far

FAQ:

Q: Does ACC cover you if you get sick and can't work?
A: No. ACC only covers accidents. If you can't work because of illness — including cancer, heart disease, or mental health conditions — you won't receive ACC payments. Income protection insurance covers this gap.

Q: What does income protection insurance pay out in NZ?
A: Most income protection policies pay up to 75% of your pre-disability income as a monthly benefit. How quickly payments start (the wait period) and how long they continue (the benefit period) depends on the policy you choose.

Q: Is income protection worth it if I already have savings?
A: Savings help, but they run out. The average income protection claim in NZ lasts six months to two years. If you have a mortgage and regular financial commitments, relying on savings alone is a significant risk.

Q: What's the difference between income protection and mortgage repayment cover?
A: Mortgage repayment cover only pays your mortgage repayments if you can't work. Income protection replaces a portion of your full income, which you can use for anything — mortgage, bills, food, or other costs.

Q: Do self-employed people need income protection more than employees?
A: Generally yes. Employees often have sick leave and continued salary support during illness. Self-employed people have no such safety net — if they can't work, their income typically stops immediately.

‍