Your money: Sign up for PMI to protect your family and your future

Because the market-place for private medical insurance (PMI) has become much more competitive, launching budget plans has provided a way for relatively new entrants such as Legal & General, Norwich Union, OHRA and Prime Health to challenge the dominance of Bupa and PPP.

"Until recently, private medical insurance was seen as an expensive luxury, out of the reach of most families," points out David Kerr, managing director of Legal & General HealthCare. "Now, it is no longer the province of the wealthy."

Legal & General recently launched three new plans offering a range of products, starting from a simple plan at pounds 9.95p a month, up to a fully comprehensive plan from around pounds 30 a month.

Others companies also follow this route, aiming to have a range of policies to match most pockets. But the cheaper the policy, the fewer the benefits.

The cheapest budget schemes will pay out only if the treatment you need is not immediately available on the NHS, and there is often a time delay of six weeks before payment.

Most policies should include cover for surgery, such as coronary bypasses, hernia repairs and hip replacements, other hospital charges and professional fees. Some will also pay for minor surgery by GPs, nursing at home, treatment for pregnancy complications, and accommodation charges for anxious parents.

But you'll be hard pushed to find a budget policy that covers long-term illness or degenerative diseases brought on by old age. In addition, self-inflicted conditions such as suicide attempts and drug or alcohol abuse are not covered, nor is Aids.

Ways to reduce the cost of PMI include agreeing to an "excess" so that you meet the first pounds 50, pounds 100 or pounds 250 of any claim. This significantly reduces premiums. "If you opt to take an excess of, say, the first pounds 100 of any claim, you will typically get your money back within 12 months through savings on premiums," says Philip Watson.

He also suggests that, if you're willing to do it, choosing the option of a sharing a hospital room will reduce premiums even more. You should also look out for discounts for paying premiums annually or by direct debit. Consider schemes such as OHRA's Medios which, unlike most others, rewards loyalty by not increasing the cost of premiums as you grow older.

A family policy can work out at good value. It's also, obviously, worth checking to see what kind of cover you are eligible for through your workplace. Many companies now offer a variety of schemes.

If your employer has a PMI scheme, check to see whether you are eligible, and what you're covered for. Most of these group polices offer just basic cover, but some firms will allow employees to extend the extent of the cover for an additional premium.

Simon Read