With premiums escalating, private medical insurance is no longer affordable for an increasing number of people unless they're a member of their employer's scheme. This is particularly the case for the over-60s, whose cover at 65 can cost more than twice as much as someone aged 45, and then increase by 20-30% a year as they move into higher age bands.

With comprehensive insurance no longer affordable, and any cut in NHS waiting lists patchy, at best, an increasing number of people are paying for treatment out of their own pockets as and when they need it.

But the self-pay route can be a costly gamble, especially with advanced medical technology pushing up the costs. For the more cautious, there are alternatives that are, effectively, a half-way house. You stick to PMI, but cut the cost of premiums by either limiting the insurance cover to certain conditions, or to treatment with long NHS waiting lists or, alternatively, pay large excesses.

A newer alternative is a co-payment scheme though, as with excesses, you have to balance this with the costs you may have to meet yourself. This concept was first launched just over 18 months ago by the not-for-profit provider Western Provident Association. Under its Flexible Health Plan, now the only policy it offers to new customers, you can either opt for full cover or pay a quarter of the annual claims up to a certain limit and in return get a discount on premiums.

You can choose one of three annual limits for your 25% contribution - £1,000, £3,000 and £5,000 - which, respectively, reduce premiums by 35%, 45% and 55%. Once your claims have reached the annual limit that you've chosen, WPA will pay all of your claims until the next policy year.

The Flexible Health Plan provides standard cover including in-patient and daypatient treatment with some contribution to outpatient costs and extra benefits like home nursing and private ambulance.

You also have the option of increasing your cover to include the full cost of specialist consultations and complementary therapies.

And this week the Exeter Friendly Society, which specialises in the over-50s market, has launched a new product along similar lines but with a different structure. Under its Shared Care scheme you have the option of paying either a minimum of 25% of the costs yourself or 50%. The Core product provides cover for in-patient and day patient treatment, but only up to a maximum annual limit of £100,000 a year which is split between you and the insurer. You can extend your cover by adding one or two other options. Option A covers out-patient services with a maximum shared annual limit of £5,000, while Option B provides cover for extras with different ceilings on the amount that can be paid out each year such as home nursing (£500), travel allowance (£50), private ambulance(£300), complementary treatments (£300).

Though the benefits are not fully comparable with its mainstream products - the Preferred Plan that provides fully comprehensive cover and its Low Cost Plan with more limited cover - Shared Care can substantially cut your premiums. For a 65-year-old the premiums would be £47.73 a month if they opted for 25% co-payment and £31.99 for the 50%.

This compares with £107 a month they would pay to get treatment at a teaching hospital in inner London and £71.35 in other hospitals under its Low Cost scheme, which is the most directly comparable. Unlike WPA, which has a cut-off joining age of 64, you can take out an Exeter Friendly policy at any time before you're 80 and, though premiums may go up, unlike most other insurers it is not directly linked to age.

Though it's always good to have more choice, the greater the variety of products, the more difficult it is to make the right choice.

As a starting point, you should get a copy of the Association of British Insurers much-improved PMI booklet, while Exeter Friendly is now offering a free guide to medical insurance in retirement.

It's worth looking at www.moneysupermarket.com and www.carehealth.co.uk to check out the products and premiums. But before making that final decision, it's essential to contact a specialist financial adviser who's a member of the Association of Medical Insurance Intermediaries.

Even then, as Penny O'Nions, a former GP and now a medical insurance specialist at The Onion Group, points out, you should then ensure that any adviser or broker you're referred to has dealings with at least 20 insurers.

Who to contact

ABI: abi.org.uk, tel: 020 7600 3333;

AMI: amii.org.uk, tel: 0870 112 0431; Exeter Friendly: exeterfriendly. co.uk, tel: 08080 55 65 75

WPA: wpa.org.uk!, tel: 01823 625 000.