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Articles by Steve Munro - Guest Contributor.

Mind the Gap: Understand the ACC Cap!

AUTHOR: Steve Munro - Guest Contributor
Invited guest writer

POSTED: 08 November 2023

As an insurance adviser and a property investor, I’ve often felt like a circus performer, juggling every dollar amidst soaring interest rates. Life's unpredictability remains the one constant through it all.

The ACC Reality Check
Many perceive the Accident Compensation Corporation (ACC) as a beacon. However, contrary to popular belief, it's not the all-encompassing safety net that it appears to be. Many Kiwis might be surprised to learn that ACC has its limits, with a ceiling set at $2,615 weekly (that's circa $136k per year - ACC pays 80% of this amount less tax). Those earning beyond this limit will face a substantial gap, which is particularly daunting for both homeowners and property investors dealing with sizeable mortgage commitments.

The Real Cost of Liquidation
Here’s a scenario: Health issues force you into a rushed property sale during a market dip. The numbers aren’t favourable. As you finalise the deal to release the much-needed cash to relieve financial stress, the IRD may suddenly have their hand out, waiting for their cut. Once your health recovers and the market booms, you realise the significant opportunity lost. The property you hastily sold is now worth substantially more. This situation underscores the value of each insurance premium paid, as the cost of the policy pales in comparison to the potential financial impact of a hasty sale.

Bridging the Gap with Insurance
Insurance is not just a safety net—it’s a vital lifeline, especially when handling large mortgages. It offers more than mere coverage; it provides peace of mind that unforeseen events won't derail your financial plans. Irrespective of whether you're earning over the ACC cap or not, there are still ways to structure your income protection so that a portion of your payments will not be offset against any income paid by ACC. This approach puts you in a much stronger position at claim time in the event of an injury.

From One Investor to Another
Consider this: Would you purchase a home without a builder's report? Similarly, relying solely on ACC is risky, especially for us property enthusiasts. Remember, forewarned is forearmed. Fortify your safety nets with the right insurance, ensuring your investments remain secure through all life’s twists and turns.

Conclusion
In the property investment game, staying ahead is crucial. Understand the nuances of ACC, strengthen your defences, and ensure your investments can withstand any storm.

Steve Munro
Risk Direct Insurance
www.riskdirect.co.nz
[email protected]

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015

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