“The greatest wealth is health”, Virgil, the Roman poet, apparently once said. The seven million people who are covered by private medical insurance (PMI) appear to agree with him.

A recent BUPA survey suggests that Britons have had enough of MRSA, long waiting lists and poor service from the NHS, with 65 per cent of respondents stating that access to clean hospitals was the most important reason for taking out PMI, followed by waiting times and speed of access to specialists. BUPA reported a 20 per cent increase in sales in the first quarter of this year, compared with 2007.

The figures indicate that healthcare scandals are encouraging more of us to invest in our wellbeing, but taking out a PMI policy does not guarantee that we will be covered for everything that goes wrong. What is or is not covered varies between policies and insurers. Generally, however, PMI is designed to cover acute conditions, from disease, illness or injury, that can be treated fully. The benefits are that policyholders will be treated quickly and have a choice of specialist and hospital. They will also have more comfortable surroundings when they are in hospital. Of course, that is if the insurer pays out.

Insurers' criteria for necessary treatment can be less forgiving than that of the NHS. Breast reductions, psychiatric care and arthritis are some of the conditions that could be excluded from the average policy. Treatments including the removal of fat, even if it is for medical reasons, are usually excluded, as are any cosmetic treatments, even if they are for psychological reasons.

The Association of British Insurers (ABI) points out that HIV/Aids, gender reassignment and infertility treatment are also excluded from standard policies. The ABI also lists organ transplants and dental services as excluded, though some insurers offer cover for these. And if your waist measurement does not fit within acceptable boundaries for your height, some insurers could refuse to cover you altogether.

However, by far the biggest exclusion on any policy is for pre-existing medical conditions - and it is this clause that generates the most disputes in medical insurance claims. With most insurers, any condition suffered in the five years before taking out the policy will not be covered, usually until two years have passed from the start date without you suffering from the condition. Furthermore, a policy's “non-disclosure” terms could mean that a claim will be invalidated if you did not let the insurer know about any condition that you have suffered in the past five years, even if it is not the same illness for which you are claiming.

The ABI recently published clarification on non-disclosure rules, which make it harder for insurers to refuse claims. However, it is still easy to be caught out.

Michael Vine, of Michael Vine & Co, the solicitors, says: “Insurers want to know your medical history, which you detail on a proposal form. Even if you complete this to the best of your knowledge, it is difficult to remember every reason for obtaining medical advice or treatment for the period requested. If you fail to disclose something - no matter how apparently irrelevant - for the period, they could refuse your claim.”

Mr Vine suggests that you authorise your proposed insurer to examine your medical records at the time of application, adding: “This might help in the event of a claim dispute if the insurer subsequently alleges non-disclosure.”

However, if you have a pre-existing condition, such as herpes, which often develops into an acute condition, such as cervical cancer, you should still be covered for the resulting condition, although treatment of the prior problem would not be covered.

Anyone who suffers medically from drug or alcohol abuse could invalidate a policy, as could anyone who is injured as a result of risky sporting activities.

A spokesman for Tesco, which recently started selling medical insurance, says: “The last thing anybody wants is to be surprised with a nasty bill for an expensive procedure. If our customers are worried that their insurance might not provide cover for any treatment, we advise them to call a helpline for clarification.”

Although it is now possible to obtain a quote from comparison websites, such as moneysupermarket.com, the number of variations and exclusions make it difficult to compare like with like. Mike Izzard, chairman of the Association of Medical Insurance Intermediaries (AMII), says: “Choosing PMI is a minefield. It is a very complicated market and is too important to get wrong. It is not like buying car insurance. If you get your health cover wrong, you are messing with life and death.”

Premiums depend on your age, but most will not be affected by gender, or whether or not you smoke. Some insurers, such as Pruhealth, take into account your lifestyle before determining the cost of your policy.

As a general rule, the cheapest “bare bones” policies, such as AXA PPP's cover sold through Tesco, have monthly premiums equivalent to your age, so a 30-year-old could expect to pay £30 a month. The most expensive comprehensive cover is about three times this and will usually cost more than £100 a month.

There are ways of reducing your premiums, but this involves creating further exclusions for yourself. One option is to increase the excess on the policy, which would mean that you would have to pay out more in the event of a claim. Another way to cut premiums is to “cost-share”, which involves agreeing a proportion that you will pay in the event of a claim. Similarly, you could reduce the cost of a policy by limiting the outpatient cover to which you are entitled.

To be eligible to make a claim, you must first be referred by a GP. Even with a referral, make sure that you contact your insurer to check that treatment is covered before arranging to see a specialist.

For more advice on PMI, visit www.privatehealth.co.uk or the AMII website at www.amii.org.uk.

Innovative scheme from National Deposit

How to make premiums cheap and affordable but still offer an adequate level of cover has always been a big dilemma for insurers. But one scheme, the National Deposit, claims to have the answer.

Unlike regular PMI policies, monthly payments into the National Deposit are split, so that half goes towards the cost of the scheme and the other half goes into a personal account. If a policyholder needs to claim, he or she pays a percentage of the cost of treatment from his or her personal account and National Deposit pays the rest.

The percentage you pay depends on your age, with under-50s paying the smallest proportion, but National Deposit will pay the majority of any claim.

For instance, a single person under 50 will have 10 per cent of any claim paid out of the personal account, with the rest paid by National Deposit. However, a single person over 65 would pay 25 per cent. A couple who are both under 50 with children will pay 25 per cent of any claim from their personal account, rising to 45 per cent once they reach 65.

In the early years policyholders can make top-up payments of £5 a month to cover them for up to £20,000 of treatment if they do not have enough in their personal accounts. Premiums vary according to cover. For instance, £20 a month gives £10,000 of annual medical cover, plus £300 for dental or optical treatment. For £50 a month, medical cover rises to £25,000 and dental and optical cover to £750.

Case Study

Jamie Hudson wanted private medical insurance to cover his whole family at a price that wouldn't break the bank. After being quoted more than £100 a month from some insurers, the 37-year-old postman from Bury found that he could obtain cover for £45 a month from National Deposit.

Mr Hudson, pictured with his wife, Susie, 37, and their daughters, Emily, 5, and Samantha, 3, wanted private healthcare because of a “bit of a scare” about MRSA at his local hospital and enlisted the help of a broker to choose a policy. He says: “We looked into it for ages, but there are so many policies that it can be very confusing. This one is easy to understand and not too much money for a family on a budget.”

Mr Hudson says that the main attraction of the National Deposit scheme is that there is no excess. “Most of the cheapest policies have a high excess, which is no good to those on a smaller income,” he says.

He has made one successful claim for private dental care, which he says is a real bonus because of the lack of NHS dentists in his area.

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