Are you eligible for your packaged account benefits?

Banks and building societies are selling packaged accounts without checking customers are eligible to use all the benefits – in particular their ability to claim on insurance policies, the Financial Services Authority (FSA) warns.

Packaged accounts (current accounts with added benefits that account holders pay a monthly fee for) have grown in popularity in recent years. One fifth of UK adults has a packaged account, according to FSA estimates, and the number of accounts on the market has increased from 33 five years ago to 69 today.

Travel, motor and mobile phone insurance are some of the most popular benefits included with packaged or 'paid-for' accounts. Almost 80% of paid-for accounts offer travel insurance; 75% include mobile phone insurance and 65% offer motor breakdown cover, according to

FSA director of policy Sheila Nicoll says packaged accounts in some instances can "represent good value and convenience", but in other cases the insurance cover customers have paid for is "useless".

She adds: "We are concerned that it may be too easy at the moment for firms to sell customers something they do not understand or need.

"We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them."

Paid-for accounts: are they worth the cost?

New proposals

The FSA has outlined new proposals to try to protect customers when signing up to a packaged account.

It is calling all bank and building staff that sell the accounts to make sure potential customers are eligible to claim under insurance policies. If they are not able to claim, staff should inform the customer of this.

In addition, the FSA wants financial institutions to send customers an 'annual eligibility statement', which will prompt current account holders to check if their circumstances have changed, therefore potentially rendering an insurance policy void.

Consumer groups have welcomed the FSA proposals. Consumer Focus has voiced its concerns about insurance sold as part of a packaged account in the past.

"The last thing this market needs is another mis-selling scandal following on from PPI. Consumers need to able to trust banks to sell them products that are right for them," says Sarah Brooks, director of financial services at Consumer Focus.

Get the most from your packaged account

Richard Lloyd, executive director of consumer group Which?, warns customers only to opt for a packaged account if they are sure they will use the separate benefits but stresses it's up to the banks to be more clear.

"Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare," says Lloyd.