Cash Plan policies are a variation on a traditional health insurance policy in a number of ways.
Like a traditional plan you pay a monthly premium to secure your policy.
When you require some form of treatment, be it dental work, a chiropractor visit or another form of treatment included in your policy, you pay for the treatment yourself and then claim back a certain amount of the cost from your insurer.
This is normally a pre-determined percentage which is agreed for various types of treatment when you sign up for a cash back scheme.
Depending on the type of scheme you take there are usually a wide range of treatments on which you can claim, including complimentary therapies such as acupuncture and homoeopathy alongside more traditional treatments like physiotherapy and chiropody.
Hospital visits are normally included, with in-patient stays covered as well as parental stays should you require to spend an overnight visit with your child.
Dental work and optical prescriptions such as glasses and contact lenses can also be incorporated into most plans.
Depending on your personal circumstances a cash plan may be more cost effective than a general health insurance policy.
If you require regular dental work or regular visits to the optician you may be better off taking a cash plan which offers a high percentage return on these particular treatments.
The real difference between a cash plan health insurance policy and full private medical insurance is that PMI is really a fully private alternative to the NHS, whereas a cash plan is intended to benefit those looking to save on everyday treatments.
It's particularly suited to those looking to pursue alternative therapies as a way of offsetting some of the costs.
There are obviously some rules covering these policies to prevent people from misusing them.
For example you probably won't get away with taking out a policy one week and claiming £4000 in dental work the next.
The majority of plans have a start up period of anywhere between one and six months during which you won't be able to claim.
Plans are also tailored depending on how much you are spending every month, with smaller monthly payments reducing both the percentage you can claim back as well as the total amount you can claim in a year.
Most cash plans do not require people to undergo a medical like those taking out PMI.
Normally the cost of the plan won't be as variable based on age and gender as a PMI policy would, with very few having an upper age limit for joining the scheme.
Looking at the facts initially it's hard to see how insurance companies make money on these plans.
For someone paying £4 a month with the option to claim back £80 a year it doesn't seem to add up to a profit for the insurers.
A large part of the profitability is based on customer apathy - most people with cash plans don't make a claim.
They may forget to return the paperwork to their insurer, they may be unsure what exactly is covered or they may just forget that they have the policy altogether.
For those who will take full advantage of the policy a cash plan can be an excellent way of reducing the cost of routine medical treatment.
Just don't forget to claim!