Last bit first:
Most holiday insurance policies only cover you for breaks of up to a certain duration. (56 days is a common maximum). It's unlikely that your existing policy would cover you but the only way to be sure would be to read the small print. (For companies which offer alternative cover, try googling 'ex-pat insurance').
The US Visa Waiver Program only applies to visitors staying for a maximum of 90 days. You'll require a B-2 visa:
http://www.usembassy.org.uk/cons_new/visa/niv/ index.html
A B-2 visa is normally valid for 10 years but it does not define how long you can stay in the USA for each visit. That's solely a matter for the immigration authorities when you arrive:
http://www.usembassy.org.uk/cons_new/faqs/faq_ visa_niv.html#niv117
However the US embassy might be able to provide guidance as to the normal maximum duration of stay permitted. Their information ought to be accurate, since they charge �1.20 per minute for it!
http://www.usembassy.org.uk/ukaddres.html
Chris