Are You Paying The Right Amount of ACC Levies?

Most dentists assume that ACC covers them when required.

We use it every day for our patients, so it feels familiar and dependable. But when it comes to protecting our income, ACC is often relied on without a clear understanding.

Take a self-employed dentist earning $200,000 a year. Because they're self-employed, they're on ACC CoverPlus by default. If an accident prevents them from working, ACC pays 80% of the previous year's taxable income, up to the ACC earnings cap of $156,641, which is $125313.  So though this dentist earns $200,000, the maximum ACC payout is $125,313 per year.

ACC also offers CoverPlus Extra, which allows you to agree on an income amount in advance, ranging from $40,401 to $125313. This can be particularly useful if there are future periods of lower income, e.g., parental leave or Covid disruptions, and it is easier to claim when you have done the paperwork beforehand. The cost difference is usually small, but the certainty at claim time can make a real difference when it matters.

Like, with our patients, ACC only pays if you had an accident.

If this dentist cannot work because of certain degenerative conditions, cancer, heart disease, or a stroke, ACC pays nothing. These are very real career-limiting risks in dentistry, which is why income protection insurance matters.

Income protection typically covers around 75% of your gross income and pays out whether the issue is caused by illness or accident. When an accident occurs, ACC pays first, and income protection tops up the remainder. In our example, 75% of $200,000 is $150,000. ACC pays $125,313, and income protection covers the remaining( $24,687).

Because of this overlap, many dentists reduce their ACC CoverPlus Extra to the minimum of $40,401 and rely on income protection to do most of the work. Done properly, this can save up to $2,000 in ACC levies each year.

Where this strategy falls short is when there's a partner or children involved.

If the dentist dies in an accident, ACC pays benefits based on the deceased's declared ACC income. A partner receives 60% of that income for up to five years, or until the youngest child turns 18. Each child receives 20% until age 18, or until age 21 if continuing education (maximum of 2 for 40%).

When the ACC cover is minimised, these payments decrease accordingly. Therefore, reducing ACC is only effective when paired with suitable life insurance. Life insurance pays out whether death results from an accident or illness. It offers an immediate lump sum or a recurring monthly benefit for a set period, or until you reach age 65 or 70, ensuring greater security for your family. That money can clear debt, replace long-term income, and give the surviving partner time and flexibility during an incredibly difficult period.

For many dentists, reducing ACC makes sense. The mistake is doing it in isolation. When ACC cover is reduced, life insurance should be part of the conversation to ensure the family is properly protected.

A truly comprehensive insurance strategy goes one step further. Trauma cover provides a lump sum if a dentist survives a significant health event (cancer, stroke, or heart attack), helping to manage time away from work, treatment costs, and practice disruption. Total and permanent disability cover protects against the scenario where returning to dentistry is no longer possible, providing long-term financial security beyond income protection.

Just as in dentistry with our patients, good financial protection isn't about one product but about comprehensive coverage. It's about how the layers work together, for the dentist, and more importantly, for the family that depends on them.

If you would like advice or support navigating insurance as part of a comprehensive plan, email ko@tfd.co.nz. If you would like a copy of my  complimentary book, Retirement Planning for Dentists