Haris Ashley
Insuring your money is a way to protect your deposits in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) insures deposits placed in savings accounts, money market accounts, checking accounts, and CDs. FDIC insurance covers up to $250,000 per depositor, per insured bank, and per ownership category. If you have more than $250,000, you can insure your excess deposits by opening multiple accounts at different banks or using a deposit network like IntraFi Network Deposits. These strategies help to ensure your money is protected and provide peace of mind in the unlikely event of a bank failure.
| Characteristics | Values |
|---|---|
| Amount insured by the Federal Deposit Insurance Corp. (FDIC) | $250,000 per depositor, per institution and per ownership category at member banks |
| FDIC insurance coverage for multiple accounts at one bank | $250,000 limit shared across all accounts |
| FDIC insurance coverage for multiple accounts at different banks | $250,000 per account |
| FDIC insurance coverage for different ownership categories at the same bank | $250,000 per ownership category |
| FDIC insurance verification | Use the FDIC's Electronic Deposit Insurance Estimator (EDIE) or call 877-275-3342 |
| FDIC insurance coverage for cash management accounts (CMAs) | Up to $5 million |
| FDIC insurance coverage for securities in investment accounts | $500,000 with a $250,000 limit for cash |
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What You'll Learn
FDIC insurance rules
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the US government that insures and reimburses your deposits up to a legal limit of $250,000 per depositor, per FDIC-insured bank, and per ownership category if your bank fails. FDIC insurance covers checking, savings, and other deposit accounts, including Certificates of Deposit (CDs), checking, savings, or money market deposit accounts (MMDAs). It's important to note that FDIC insurance does not cover investment accounts or non-deposit investment products, even if they were purchased at an insured bank.
To determine if a bank is FDIC-insured, you can ask a bank representative, look for the FDIC sign at your bank, or use the FDIC's BankFind tool, which provides detailed information about all FDIC-insured institutions. Coverage is automatic when you open one of these types of accounts at an FDIC-insured bank.
In the unlikely event of a bank failure, the FDIC acts quickly to ensure that all depositors receive prompt access to their insured deposits. The FDIC responds in two ways: first, as the insurer of the bank's deposits, it pays insurance to depositors up to the insurance limit, usually within a few days after a bank closing. Second, as the receiver of the failed bank, the FDIC assumes the task of selling or collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit.
It's important to note that FDIC insurance coverage protects depositors against the failure of an insured bank, but it does not protect against losses due to theft or fraud, which are addressed by other laws. Additionally, FDIC insurance coverage is calculated dollar-for-dollar, including principal and any accrued interest up to the date of the insured bank's closing.
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Insuring money without opening multiple accounts
The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per insured bank, for each account ownership category. This means that if you have more than $250,000 in a single account, only a portion of your money is protected. For example, if you have $300,000 in a savings account, the FDIC would guarantee your first $250,000, but the remaining $50,000 would be considered uninsured.
One way to insure your money without opening multiple accounts is to use a cash management account (CMA) with a sweep feature. This allows your deposits to be spread across multiple FDIC-insured banks. For example, if you have $500,000 in your CMA, the financial institution may spread it across three banks, putting $245,000 into one bank (to account for any unpaid interest that could push your balance above the $250,000 FDIC protection limit), $245,000 into another, and $10,000 into the final bank. This way, you can spread your money out without losing FDIC insurance protections.
Another option is to use a bank network like IntraFi Network Deposits, which works with thousands of banks and will spread your money across multiple banks to ensure you're adequately covered. With IntraFi, you can keep all your money at one bank, and the program will funnel your money into deposit accounts of your choice at other network banks. This service works with checking accounts, money market accounts, and CDs.
If you're a Massachusetts resident, the Depositors Insurance Fund (DIF) offers unlimited insurance above FDIC limits at about 70 banks based in Massachusetts.
Additionally, if you're married, you can structure your accounts to increase your FDIC coverage. For example, you and your spouse could each have an individual account with $250,000, effectively insuring $500,000 at a single bank.
Finally, you can also explore options offered by major brokerage firms like Fidelity or Charles Schwab, which provide certain FDIC-insured deposit accounts, including bank accounts, CMAs, and health savings accounts. These programs often automatically spread your money across multiple partner banks, each providing $250,000 in FDIC coverage.
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Deposit insurance for securities
Deposit insurance, also known as deposit protection or deposit guarantee, is a measure implemented in many countries to protect bank depositors from losses caused by a bank's inability to pay its debts. This is usually due to a bank failure.
In the United States, the Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per institution, and per ownership category at member banks. This limit applies to each FDIC-insured bank. The FDIC was founded in 1933, and since then, no depositor has lost any FDIC-insured funds.
If you want to insure more than $250,000, you can do so by opening an account at a second FDIC member bank. You can also open accounts under different ownership categories at the same bank to increase your coverage. For example, a married couple could structure their accounts to insure $500,000 at a single bank, with individual accounts in each spouse's name.
Another way to increase your coverage is by using bank networks like IntraFi Network Deposits, which work with thousands of banks to spread your money across multiple accounts and ensure maximum FDIC protection.
In other countries, deposit insurance is also provided by government-run or government-backed institutions. For example, in Switzerland, there is a privately operated deposit insurance system called Deposit Protection of Swiss Banks and Securities Dealers, which guarantees up to CHF 100,000 per bank customer per bank. In the United Kingdom, deposits are protected by the Financial Services Compensation Scheme, which covers losses of up to £85,000 per account or £170,000 for joint accounts.
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Insuring money in different ownership categories
The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per institution, and per ownership category at member banks. This means that the FDIC covers all types of deposit accounts, including savings, checking, and money market accounts, up to $250,000 per account holder. It is important to note that investment products like mutual funds and money invested in stocks or bonds are not covered by FDIC insurance.
Now, let's explore how insuring money can vary depending on different ownership categories:
Single Ownership
An account owned by a single individual falls under this category. Each person's deposits are insured up to $250,000 per insured bank. If a person has multiple accounts at the same insured bank, the total balance across those accounts is counted towards the $250,000 limit.
Joint Ownership
This category refers to accounts shared by two or more people, such as spouses. Each co-owner's share is insured separately up to $250,000. For example, a married couple could have individual accounts in their respective names, each insured for $250,000, effectively insuring a total of $500,000 at a single bank.
Retirement Accounts
Retirement accounts, such as IRAs and 401(k) plans, are considered a separate ownership category. Cash in these accounts is insured up to $250,000 per owner. It is important to note that funds invested in stocks, bonds, mutual funds, or annuities within retirement accounts are not FDIC-insured.
Trust Accounts
Trust accounts, such as payable-on-death (POD) or living trust accounts, are another ownership category. These accounts are set up to designate beneficiaries who will receive the funds upon the owner's death. Each beneficiary can add another $250,000 in coverage.
Business Accounts
Business accounts and personal accounts are considered separate ownership categories. If an individual has both types of accounts at the same bank, they can increase their FDIC insurance coverage.
It is important to note that opening multiple accounts of the same type at one bank does not increase your coverage. To expand coverage beyond $250,000, you can consider using bank networks, such as IntraFi Network Deposits or Impact Deposits Corp., which automatically distribute your deposits across multiple FDIC-insured banks. Additionally, credit unions and brokerage firms offer certain FDIC-insured deposit accounts and can provide access to higher yields and expanded coverage.
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Insuring money in excess of $250,000
The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per institution, and per ownership category at member banks. This limit has been the same for over a decade. If you have more than $250,000 in a single account, only a portion of your money is protected.
- Open an account at a second FDIC-member bank: The most straightforward way to get another $250,000 insured is to open an account at a second FDIC-member bank. You can also open accounts at different branches of the same bank, but this will not increase your insurance.
- Use a bank network: Bank networks like IntraFi Network Deposits and Impact Deposits Corp. automatically distribute your excess deposits across multiple FDIC-insured banks to ensure maximum FDIC protection. This allows you to keep all your money at one bank while still getting the benefit of FDIC insurance.
- Open accounts under different ownership categories: Each ownership category receives its own $250,000 insurance limit. For example, a married couple could structure their accounts to insure $1 million at a single bank by having individual accounts in each spouse's name.
- Use a cash management account (CMA): CMAs function like checking accounts but can also be used to insure excess deposits. Some CMAs have a sweep feature that automatically spreads your deposits across multiple FDIC-insured banks, ensuring your money stays within FDIC limits.
- Use a credit union: Credit unions that have National Credit Union Administration membership offer up to $250,000 of insurance per person, per institution, and per ownership category through the National Credit Union Share Insurance Fund.
- Use a brokerage account: Brokerage accounts can provide access to money market funds, which are not FDIC-insured but are generally considered low-risk investments. Brokerage accounts can also offer CDs from different banks, making it easier to stay within FDIC limits.
- Use the Certificate of Deposit Account Registry Service (CDARS): CDARS is a network of banks that insure millions for CD savers. By investing with a CDARS network member, your money is divided into CDs issued by different CDARS banks, each protected by the $250,000 FDIC insurance limit.
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Frequently asked questions
The Federal Deposit Insurance Corporation (FDIC) insures deposits placed in savings accounts, money market accounts, checking accounts, and CDs. FDIC insurance covers up to \$250,000 per depositor, per insured bank, and per ownership category.
You can insure more than the $250,000 FDIC limit by opening accounts at more than one institution or using a deposit network. You can also open accounts under different ownership categories at the same bank to increase your FDIC coverage.
FDIC insurance coverage is automatic when you open one of these accounts at an FDIC-insured bank. You can use the FDIC's Electronic Deposit Insurance Estimator (EDIE) to calculate your insurance coverage based on ownership category and account balance.
FDIC insurance does not cover stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if purchased at an FDIC-insured bank. It also does not cover non-deposit investment products or default/bankruptcy of any non-FDIC-insured institution.
