For most people protecting their health and that of their family is a top priority. In the UK there exists a source of free healthcare in the form of the National Health Service but there are limits as to how much it can be relied upon.

There has been criticism about care standards in some areas of the NHS whilst the country’s ageing population is placing further strain on the system. Reforms of the service will present an opportunity for providers of Private Medical Insurance (PMI) and their more bespoke approach to healthcare.

The most common argument in favour of Private Healthcare is that it offers a higher level of healthcare than that provided by the National Health Service. Although the NHS acts swiftly in the case of life threatening conditions, there are waiting lists for less severe ailments.

Indeed, treatments for conditions that do not pose a risk to human life may not be provided. Private healthcare thus provides a means by which illnesses that affect quality of life - whilst not putting it at risk - can be dealt with swiftly.

PMI policies specialise in the treatment of acute conditions that are curable in a short period of time. In contrast to this, a chronic condition will be long lasting and unresponsive to treatment.

Ongoing treatment of such conditions is outside of the scope of private health insurance products. PMI will also not cover emergency treatments as the A&E departments at public hospitals are best equipped to cope with these.

Although the distinction between acute and chronic medical conditions is fairly straightforward, the specific list of illnesses insured varies between providers.

It is important to read product literature carefully and an independent financial adviser can be helpful here. It is also worth being aware of the provider’s stance on conditions which are acute at outset but become chronic when they do not respond to treatment. Cancer is a notable example in this regard with many insurers excluding the condition completely.

In order that their products have a broad appeal providers will generally offer three levels of cover – budget, standard and comprehensive.

Budget plans are the lowest cost option offering the most basic level of cover. There will almost invariably be a mandatory excess whereby the policyholder must pay the first part of each claim. Excesses can be as high as £500. Cover will be limited to the bare essentials such as doctors’ fees and accommodation.

The next step up is standard cover. This will provide a broader range of benefits and the annual limits placed on claims will be higher. The most expensive option is the comprehensive plan that will provide access to the broadest range of hospitals, typically including those in central London. Outpatient costs will be covered in full, and treatment for family members may also be included.

Beyond this there will be different options as to how the policy is underwritten. Common to all providers will be the exclusion of pre-existing medical conditions. This means that any illnesses for which treatment has been sought before the policy starts will not be covered.

Full medical underwriting is the most thorough method and will require the completion of an extensive questionnaire about the applicant’s medical history. This is likely to be required for those who have never been insured before.

Alternatively those who choose to change insurer may be accepted by the new provider on a Continuing Personal Medical Exclusions (CPME) basis. In essence the underwriting decision under the old plan will be transferred to the new one.

Finally there is moratorium underwriting under which you will not need to provide any details of your medical history. The proviso is that any medical conditions from which you have suffered in the past five years will automatically be excluded. The ailment will continue to be exempt from cover until it has gone without treatment for at least two years.

Although private medical insurance can be purchased by individuals, employers are increasingly offering PMI as part of their employee benefits package. Under a corporate scheme the premiums will be paid by the employer but taxable on employees as a benefit in kind.

They will be treated as a deductible expense for corporation tax purposes and will also be less expensive than individual policies due to economies of scale.

In addition particularly large schemes with many employees could be eligible for underwriting which does not exclude pre-existing conditions.

This is called medical history disregarded underwriting and means that the insurer will accept a scheme and disregard all previous medical conditions.

However, if claims are deemed excessive by the insurer, the premium is likely to increase significantly at renewal.

* Trevor Law is a director with Merito Financial Services, chartered financial planners, based in Solihull. E-mail: tilaw@meritofs.com