Most tradies know about ACC. It's automatic, it covers workplace accidents, and it's part of the fabric of working in New Zealand. What most don't know is what it doesn't cover — and for a self-employed tradie, the gap can be catastrophic.
What ACC Actually Covers (and Doesn't)
ACC covers injuries caused by accidents. If you fall off a ladder, cut yourself with a saw, or get injured in a vehicle accident, ACC will cover your medical bills and pay weekly compensation (currently 80% of your pre-injury earnings up to a maximum) while you recover.
What ACC does not cover: - Illness — cancer, heart disease, diabetes, stroke - Mental health conditions — depression, anxiety (unless caused by a specific work-related physical injury) - Gradual onset injuries — back conditions, RSI, hearing loss that develops over time (these are in a grey zone) - Pre-existing conditions that flare up
As a tradie, your body is your business. Back injuries, knee problems, shoulder wear, and stress-related illness are far more likely to take you off the tools long-term than a single acute accident. And for none of these does ACC pay a cent.
What Income Protection Insurance Does
Income protection (also called income replacement or disability insurance) is a policy that pays you a monthly benefit if you're unable to work due to illness or injury — including the things ACC doesn't cover.
Key features:
Benefit amount: Typically up to 75% of your pre-disability income, paid monthly. Some policies allow up to 85% for professionals.
Benefit period: How long the policy pays. Common options are 2 years, 5 years, or to age 65. The longer the benefit period, the higher the premium — but also the more protection for serious long-term conditions.
Waiting period (elimination period): How long you wait before payments start after you're unable to work. Common options: 4 weeks, 8 weeks, 13 weeks, 26 weeks, 52 weeks. A longer waiting period means lower premiums — choose the longest period you could survive on savings and any ACC entitlements.
Own occupation definition: The better policies pay if you can't do your specific occupation (e.g., working as an electrician). Cheaper policies may pay only if you can't work in any occupation — which means if you can sit behind a desk, they might stop paying even though you can't do your trade.
The Real-World Risk for Tradies
Consider this scenario: a 38-year-old builder develops a serious back condition. Not from a specific accident — just years of physical work. ACC doesn't apply. He can't work on site. He has a mortgage, two kids, and no savings buffer.
Without income protection insurance, he's on his own.
Now add income protection: $3,500/month after a 13-week waiting period, paid for up to 5 years. That's $210,000 of coverage for a condition that sidelines him indefinitely.
The probability of this happening is higher than many tradies expect. Insurance industry data suggests a 35-year-old has roughly a 1-in-4 chance of being unable to work for at least 3 months before reaching retirement age. Cancer, cardiovascular disease, and mental health conditions are the leading causes — none covered by ACC.
What Does It Cost?
Income protection premiums vary based on age, trade, health history, benefit amount, waiting period, and benefit period. As a rough guide for a healthy tradie in their 30s:
| Cover | Approximate Monthly Premium |
|---|---|
| $3,000/month, 13-week wait, 2-year benefit | $60–$100 |
| $4,000/month, 8-week wait, 5-year benefit | $120–$180 |
| $5,000/month, 4-week wait, to age 65 | $200–$350 |
Premiums are generally tax-deductible as a business expense if the policy pays a taxable benefit (most income protection policies do). Check with your accountant.
Agreed Value vs Indemnity Policies
There are two main policy types:
Agreed value: The monthly benefit is set at application and paid regardless of your actual income at claim time. If you earned $80,000 last year and earn $50,000 this year (quiet year), you still claim based on the agreed amount.
Indemnity: The benefit is based on your income at the time of claim. If you've had a slow year, you may receive less than expected.
For sole traders and self-employed tradies whose income fluctuates, agreed value policies provide more certainty — though they cost more.
How to Get Covered
Income protection is sold through financial advisers (the most common route) or directly through insurance companies. Given the complexity of self-employed policies, a financial adviser who specialises in self-employed clients or tradies is worth the time.
Key questions to ask: - Is this "own occupation" or "any occupation" definition? - What's the maximum monthly benefit I can insure? - How is income calculated at claim time (especially if my earnings fluctuate)? - Are mental health conditions covered? - What are the exclusions?
Compare at least two providers before committing. Southern Cross, Fidelity Life, AIA, Partners Life, and Cigna all offer income protection in NZ.
Key Takeaways
- ACC covers accidents only — illness, gradual injury, and most long-term conditions are excluded
- Income protection pays up to 75% of income if you can't work due to illness or injury
- Choose the longest waiting period you can afford to cover (reduces premiums significantly)
- Look for own occupation definition policies — not "any occupation"
- Premiums are typically tax-deductible for self-employed tradies
- Get advice from a financial adviser who works with self-employed clients
Read our guide on Choosing the Right Insurance for NZ Tradies for a full picture of all the cover types worth considering.
NZ Tradie Tools provides free calculators, templates, and guides for New Zealand tradies. This article is general information only — insurance products vary and you should consult a licensed financial adviser before purchasing.