The fittest survive and prosper - here's how it works out

Taking care of yourself can make sense financially as well as personally. James Daley looks at the options

Health was back at the top of the political agenda this week, as the Government released its long-awaited White Paper outlining a number of bright ideas to save the British public from themselves. A ban on smoking in public places, a traffic lights system to highlight unhealthy foods, and an end to fast-food adverts during children's TV time were all on the agenda, as the Government warned that too many people are living unhealthy lives - and most of them don't even realise it.

Health was back at the top of the political agenda this week, as the Government released its long-awaited White Paper outlining a number of bright ideas to save the British public from themselves. A ban on smoking in public places, a traffic lights system to highlight unhealthy foods, and an end to fast-food adverts during children's TV time were all on the agenda, as the Government warned that too many people are living unhealthy lives - and most of them don't even realise it.

But while living healthily simply to please the Government may not be motivation enough for most, keeping fit and well can now seemingly save you money, too. A new healthcare plan launched by the Prudential last month rewards those who take steps to improve their well-being, reducing premiums for people who can demonstrate a marked improvement in their health over one year.

The plan is effectively a comprehensive private medical insurance (PMI) product, with a few innovative extra bells and whistles which are new to the UK market. Customers who don't make a claim in any given year, will receive a discount on their following year's premiums, regardless of how well they treat themselves.

However, for those who take steps to improve their health - such as doing more exercise, losing weight or stopping smoking - premiums will be reduced even further via a points system. Catherine McGrath, the chief executive of PruHealth, says that if you manage to build up maximum points in a year, you could be required only to pay the increase in premiums that arises from age and medical inflation (the cost of advances in medical technology) during that year. This could see your premiums considerably reduced.

As with all PMI cover, PruHealth is not cheap - at least not at the outset. Advances in medical science and increases in life expectancies have sent the cost of health insurance soaring in recent years, with the average comprehensive plan priced at about £1,000 a year for a 40-year-old male.

For the comprehensive option of the PruHealth plan, a 25-year-old non-smoking male could expect to start paying about £50 a month, while a 65-year old man would pay almost £200 a month. These premiums are about 20 per cent less for those who opt for the "essential" plan, which does not pay out for most non-hospital treatments.

As you would expect, the main advantage of comprehensive PMI is that you will be covered for just about any eventuality (apart from treatment for conditions that you had before you took out the policy). But if you find the prices a bit steep, there are other options (not involving going to the gym) that can help in keeping the cost down.

If you've already got a health insurance policy and you're looking to save money, Standard Life Healthcare offers a switching service which allows you to keep any no-claims benefits you've built up, and vows still to pay out on any conditions that developed since you took out your existing policy.

Opting for a bigger excess on your policy is another easy way of keeping monthly premiums down. However, this means you will need a few hundred pounds spare - or must be happy to resort to the NHS - to cover more minor ailments. Accepting a £500 excess can halve your monthly premium on many comprehensive policies.

Another option is to exempt certain treatments from your policy. If you're happy to agree not to be covered for the likes of heart disease, cancer, psychiatric problems or strokes, for example, you will be able to buy a much cheaper policy. Most providers offer a basic level of cover, to which extras can be added for an additional fee.

One of the most popular options in recent years, for those in search of cheaper premiums, is to opt for a "co-payment" or "shared responsibility" plan. This works by customers agreeing to pay a certain percentage of any medical bills that they incur. For example, in the case of the Western Provident Association (WPA), one of the market leaders in co-payment plans, customers pick up 25 per cent of any costs, while WPA pays for the remainder. WPA's policies come with a maximum that customers can be forced to pay in any one year - either £500, £1,000, £2,000 or £3,000. The higher the cap you opt for, the cheaper the policy.

Julian Stainton, WPA's chief executive, says that while the cost of most medical policies has been rising by as much as 10 per cent a year, the cost of co-payment plans has moved along with inflation. As a result, a growing number of people have been switching from comprehensive policies to co-payment plans, saving themselves hundreds of pounds a year.

The cheapest option of all is to go for a cash plan. These cost as little as £100 a year and pay out a fixed sum for every day you spend in hospital, or for specific treatments, up to an annual limit. While many of the major health insurers now offer these, companies such as Medicash specialise exclusively in their provision.

If you don't want to pay even £100 a year, one final option is to enlist with a service such as Exeter-based GoPrivate, which will find the cheapest private healthcare deal when you are in need of treatment. Prices vary dramatically in the private sector, so these services can save patients thousands of pounds when they are looking for the best place to go for their hip replacement or knee operation.

Before you buy any medical insurance, it's worth checking to see whether you are covered by your company. Although sales of individual PMI cover have been on the slide in recent years, the number of companies buying cover for their staff has been increasing - with many employees unaware of their entitlements.

If you're not covered at work, however, and you know which sort of healthcare plan you're after, the place to go in search of the best offers is the internet. Websites such as www.moneysupermarket.com and www.moneyextra.com allow you to compare the best deals for your individual circumstances. Alternatively, to find an independent financial adviser in your area, go to www.unbiased.co.uk.

While the Government has been ploughing increasingly large amounts of money into the NHS, Mr Stainton says that he still sees a healthy demand for PMI. Recent research shows that even with the planned increases in NHS spending of 7.2 per cent a year, above inflation, the Government will only just manage to keep up with the rising costs caused by increased life expectancies. The bottom line, says Mr Stainton, is that one shouldn't expect to see any marked improvement in the NHS any time soon.

'I know I made a good choice'

Sheila Tighe, 56, a manager for an industrial services company in Wirral, had fully comprehensive private medical insurance provided by her company for most of her working life.

Recently, however, when her firm elected to switch providers, she decided to take responsibility for her own medical cover, opting for a co-payment plan with WPA.

"First of all, I was a little negative about the idea of shared responsibility, as my company policy had always paid for everything before," she said. "But when they explained it to me, I thought it sounded like a good idea."

Having already made a claim on her new policy, Ms Tighe said she is convinced she made the right choice. While her medical bills have been sky high, she has only had to pay the first 25 per cent, up to a maximum of £500. "My husband and I are both signed up to the policy, and the cost has been very manageable - even after I had to claim."