Beware of policies that do no good

HEALTH INSURANCE SURVEY: gain more protection and you don't have to pay the earth, is the claim. We examine the range of different policies avai lable, from sick pay cover to insurance for the costs of going into a nursing h ome

In the largely unregulated world of health and medical insurance, it pays to do your homework before signing up for a policy, writes Tony Lyons.

Much of the business carried out is largely unsupervised by any of the regulatory authorities, and the terms on offer vary widely.

One day, all the hospital, medical care, critical illness, permanent health and other types of insurance against illness may well come under the aegis of one of the regulators. But until then, anyone wanting to take out a medical policy needs to proceed with caution, following a few simple rules.

Determine the sort of policy you want. If you are satisfied with the NHS, which cannot be bettered for emergency treatment, then a policy that pays you money when you go into hospital may be a better and less costly alternative than one that provides private medical treatment.

If you are worried about loss of income because you may be out of employment for a long time, permanent health insurance or an income protection policy will be suitable.

But if you are more worried about suffering from an acute medical condition that, while debilitating, may not keep you off work for too long, critical illness cover is more suitable.

Read the small print. Make sure the policy covers you for what you need. There are probably more complaints about the small print of health- care policies than most other types of insurance.

Look at the policy exclusions and make sure you are happy with them. Many insurers will not pay any benefits for a pre-existing medical condition, while others will provide cover if there has been no need for treatment for a couple of years. It can be worth while paying a higher premium for covering such a problem rather than choosing a cheaper provider. Remember, not declaring such a condition will invalidate the policy.

A number of medical insurers refuse to pay for alternative medicines, osteopathy or chiropractic treatment, while some will not pay for any outpatient treatment. Some limit the conditions on which they will pay benefits. They may be wary, for example, about mental and stress-related problems.

Decide how much of the cost you can afford to take on. Premiums for permanent health insurance, for example, can be cut by a half to two-thirds if benefits become payable six months after the policyholder is unable to work, rather than one month.

Choosing from a restricted list of hospitals and range of treatments with one of the budget plans can lead to a 25 to 50 per cent reduction in costs.

Many companies employ their own direct salesforces which will try to sell a particular policy. If you need help in choosing a policy, contact an independent financial adviser.