Definitions

• Private Medical Insurance (PMI) is insurance taken by a group or individuals which is designed to pay for the cost of non-emergency medical treatment. Policies vary in the amount of cover provided, which is related to the cost of the policy.Some companies are now offering low cost insurance schemes.The cost is kept down by setting a high excess typically £1000.This sort of policy will cover the cost of a major disaster but not minor knocks. The market is led by group schemes, usually taken out by companies and used as a perk for employees.The perk is looked upon by the Inland revenue as a benefit in kind and taxed accordingly.

• Cash plans: The closest relative to PMI. Consumers pay a relatively small monthly premium and receive money towards dental, optical and a range of hospital treatments. Some plans also cover complementary medicine.

• Income Protection (IP): Previously known as Permanent Health Insurance (PHI), sometimes referred to as earnings replacement, this provides up to 75% of an individual's income in the event of illness or accident which prevents the policyholder from gaining employment.

• Group income protection The number of employees covered by group Income Protection policies has risen dramatically since 1995. As business confidence has increased, companies have been more inclined to offer employee benefits. The provision of income protection cover is one way in which to try to encourage staff loyalty.

• Critical Illness Cover (CIC): formerly known as dread disease, this pays out a lump sum after a fixed period (usually 30 days) following diagnosis of a serious illnesses such as a heart attack or stroke. The money paid can be used for any purpose.

• Long Term Care insurance (LTC): these are policies taken out to fund the cost of full time care, either in a nursing home or in a person's own home. The product is relatively new, and mainly targets the elderly.

• Cash plans Cash plans pay benefits direct to policyholders when they have hospital or other healthcare treatment. Benefits include a set amount for every night spent in hospital, a cash sum for surgery that does not involve an overnight stay and a recuperation payment for individuals staying in hospital for a set period. Many everyday procedures such as dental check-ups and eye tests are covered. Premium rates are kept low by limiting the maximum amount of benefit receivable in one year, for each individual element of the plan. Today, plans serve both the individual and corporate markets. Employers can provide cash plans as a benefit to their workforce, without the prohibitive cost of supplying standard PMI.Blue-collar workers have traditionally been the main buyers of cash plans, with premiums beginning at as little as £1 per week. The product is less complex than medical insurance, and is more suitable for low income individuals than a full PMI policy
• The 'self-pay' market The 'self-pay' market allows treatment in a private hospital without taking out insurance. There is an argument in favour of building up your own health fund in a bank or investment vehicle to pay for treatment should ti be necessary.There was a 20% increase in the 'self-pay' sector in 1998. 'Self-pay' now constitutes 10% of all private healthcare. The method is especially attractive to people who want operations that are not covered by medical insurance or provided by the NHS, such as cosmetic surgery or IVF. Similarly, consumers who cannot afford the growing cost of PMI subscriptions for basic ailments, can buy private treatment directly in the event of an emergency. Many NHS Trust hospitals also offer private treatment on a 'pay as you go' basis. NHS hospitals are increasingly setting up private wings as a means of raising extra income.