What to look for if you are self-employed

Self-employment removes the safety nets that salaried employees do not think about. There is no accumulated sick leave, no employer paying you for a fortnight while you sort yourself out, and often no colleague to hold the work together. If you stop, the income stops, and frequently the business starts losing value at the same time.

That makes income protection the first conversation rather than the last. It is also the most technical product in the personal risk suite, and the two features that matter most to a self-employed person — how income is proved and how ACC is offset — are precisely the ones a price comparison cannot show.

Add to that the ordinary complications of running a business: a personal guarantee on a lease or a loan, a shareholding that needs to be bought out, and a set of tax questions that only your accountant can answer.

1. 1Establish whether agreed value is available for your income type. Under agreed value your benefit is fixed at application on the financial evidence you supply then, so a bad year later does not reduce it. Under indemnity, income is assessed at claim. For fluctuating earnings that difference can be the whole policy, and availability has narrowed across the market.
2. 2Understand how your income will be assessed. For a company shareholder, what counts — salary, shareholder salary, dividends, retained profit? Ask this at application, in writing, not at claim.
3. 3Check your occupation class at each insurer. Class definitions are not standardised, and class determines which waiting periods, benefit periods and TPD definitions are available to you, not just the price.
4. 4Model the ACC interaction. Most New Zealanders are covered by ACC for injury and not illness, and most income protection policies offset ACC. Ask for two worked examples: an ACC-covered injury and an illness ACC does not cover. If the answers are similar, the structure is wrong.
5. 5Look at ACC CoverPlus Extra. It lets a self-employed person agree a level of cover in advance rather than relying on a proof-of-earnings assessment after an injury. It changes what your income protection should be sized and structured around, so the two decisions belong together.
6. 6Cover the business separately. A personal guarantee, a business loan or a shareholding buy-out are business problems and usually need their own policies, with ownership and tax treatment settled with your accountant.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether the income protection quoted is agreed value or indemnity, and what evidence was used to set the benefit.
• Whether your occupation class restricts the waiting or benefit periods available.
• Whether the waiting period you chose is one you could actually fund from savings.
• Whether ACC CoverPlus Extra is in place and at what level, because it changes the offset arithmetic.
• Whether a personal guarantee is covered anywhere, and by which policy.
• Whether premiums are deductible and benefits taxable under your structure — that changes how much to insure.

Every New Zealand insurer writes cover for the self-employed to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Proving self-employed income to an underwriter is a documentation exercise, and an adviser knows what each insurer wants.
• Where one insurer will not write agreed value for your income type, an adviser can find one that will or structure around it.
• Occupation classification differs between insurers, and an adviser knows which classes your work most favourably.
• An adviser models the ACC interaction, including CoverPlus Extra, so you are not paying twice for the same risk.
• For business cover, an adviser works alongside your accountant on ownership, valuation and tax treatment.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.