Drivers warned of hidden insurance fees

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Insurance adjuster assessing damage to car

Motorists are being urged to check their credit card statements for small payments to insurance companies they might not even know they signed up for.

An AOL Cars investigation has revealed that drivers could have fallen into a trap of paying for 'personal accident insurance' on top of their car policy without even knowing it.

Unlike car insurance policies, which last a year and have to be renewed, the personal accident cover runs independently and indefinitely, with the insurer taking monthly payments from an account or credit card until the policyholder cancels it.

Personal accident insurance generally covers death, permanent total disablement and the loss of limbs, paying out separately to car insurance cover. It is not a legal requirement in the UK.

No renewal information will be issued for these policies, though, and many drivers only realise the cover is in place when they spot the monthly payments – often as small as £4 – on their statements.

To make matters worse, some car insurance policies sold online automatically 'opted-in' customers to this additional cover and unless they spotted it at the time of purchase and carefully read the documentation that arrived in the post, they could be unaware the cover is even running.

"I took out a car insurance policy with RAC and cancelled it after a month," one driver told AOL Cars.

"That was two-and-a-half years ago and only this week I spotted the £4 monthly charge to Avon Insurance, a completely separate company to RAC.

"I had fallen into this trap of paying for the accident cover and didn't even know about it. The firm said it would have carried on charging me until I was 70. I didn't see the terms and conditions of this when the policy documents were sent out – perhaps I overlooked them – but I wasn't aware I had bought this and I my mind it was clearly mis-sold."

AOL Cars spoke to Avon Insurance regarding the policy and the company refused to comment. However, RAC Insurance's customer services department, who sold the policy alongside the car insurance, refunded the money and apologised.

There could be many other motorists being charged for these policies and they too may be completely unaware of the hidden costs involved.

Clare Francis, editor-in-chief of MoneySuperMarket.com, said: "It's always worth checking your bank and credit card statements to make sure nothing is going out of your account that you're not aware of.

"If you discover payments going out for protection cover that you had no idea you had, that is a clear case of mis-selling. Cover like that should have been explained at the point of sale because you might not fit the eligibility criteria, in which case even if you needed to make a claim, it wouldn't pay out."

She added: "If you feel you have been mis-sold a policy like this you need to complain, in writing, to the company in the first instance. It has eight weeks to respond and if they fail to do that you can escalate it to the Financial Ombudsman Service, which will investigate on your behalf."

The Association of British Insurers said: "Insurers have an obligation to outline policy fees clearly and the cover that is being purchased.

"The insurer that sold the policy had a duty of care to ensure the cover was suitable for the circumstances. If consumers believe that they have not been sold the right cover or were unaware of all of the cover sold to them, then they will need to check with their insurer in the first instance.

"In the overwhelming majority of cases, this will resolve any issues. However in some isolate cases, consumers have recourse to the Financial Ombudsman Service."