New Zealanders do not really understand how the country’s no-fault accidental injury compensation scheme works, potentially leaving them without critical life insurance coverage, according to new research from Partners Life.

About 34% mistakenly believe they will be covered for unexplained pain and illness under the scheme, which is run by the Accident Compensation Corporation (ACC).

The survey of a sample of 1007 residents also found 25% wrongly think they are covered for time off work due to unexplained back pain; 24% believe they are covered for time off work due to a hernia; and 18% think they are covered for time off work due to an illness, such as a cancer diagnosis.

In other key findings, only 13% have critical illness insurance and 9% have income insurance while 58% say they are not likely to get life insurance in the future.

Partners Life MD Naomi Ballantyne says misconceptions around what ACC covers are particularly worrying as people are not aware of the risk they are causing themselves by not getting insured.

“One of the biggest misconceptions when it comes to life insurance is that it is only something financially comfortable people should think about,” she said.

“Losing the ability to earn an income due to an unexpected health event can put you on the backfoot financially, which can be hugely difficult to recover from.”

The survey also found that younger New Zealanders are increasingly misinformed about what the ACC covers. About 38% of 18-24-year-olds believe the scheme covers them for time off work due to a critical illness, like a cancer diagnosis.

And more than half (51%) of those in the 18-24 age bracket believe accidents are the leading cause of death in New Zealand, when it is in fact cancer.

“When it comes to insurance, the knowledge gap in New Zealand widens among younger generations,” Partners Life Chief Marketing Officer Kris Ballantyne said.

“The lack of understanding around how insurance works combined with our indifferent attitude toward it is leaving many Kiwis at a great deal of risk that they are oblivious to.”

She says respondents suggesting they are too young for cover is also a myth to dispel.

“Insurance is most important when people are not yet financially secure enough to weather a loss,” Ms Ballantyne said.

“If you’re in your twenties, for example, you have your whole life ahead of you to build financial stability but you also have the most to lose if an illness restricts your earning potential.”