Savings Account Insurance: How Much Are Your Savings Protected?

High-yield savings accounts (HYSAs) are a great way to maximize interest on your savings. They pay far more than the average checking account rate and more than the average savings account rate. While there is no one-size-fits-all answer for how much money to keep in your HYSA, it's important to note that deposits are federally insured for up to $250,000 and offer a safe place to put your money while earning interest. This insurance doesn't protect you from investment losses, but it steps in if your brokerage company fails.

FDIC insurance limit per account

The standard FDIC insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. This means that if you have two accounts in different ownership categories at the same bank, you will be insured for up to $250,000 for each account. For example, if you have a single ownership account and a joint ownership account with one or more people at the same bank, you will be insured for up to $250,000 for your single ownership account deposits and another $250,000 for your joint ownership account deposits, for a total of $500,000 in coverage.

If you have two single ownership accounts (such as a checking account and a savings account) and an individual retirement account (IRA) at the same FDIC-insured bank, you will be insured up to $250,000 for the combined balance of the funds in the two single ownership accounts. You will be separately insured up to $250,000 for the funds in the IRA, as IRAs are in a different account ownership category.

You can also increase your FDIC deposit insurance coverage by creating a payable-on-death account, also known as an informal revocable trust, or by adding beneficiaries to your accounts. For example, a revocable trust account with one owner naming three unique beneficiaries can be insured up to $750,000. The FDIC does not limit the number of beneficiaries a depositor may identify on a trust at a depository institution for trust accounts, even if there are more than five beneficiaries. However, coverage is limited to $250,000 per beneficiary up to a maximum of $1,250,000.

It is important to note that FDIC insurance covers deposits in all types of accounts at FDIC-insured banks, but it does not cover non-deposit investment products, even those offered by FDIC-insured banks. Additionally, FDIC deposit insurance does not cover the default or bankruptcy of any non-FDIC-insured institution.

Insuring funds over $250,000

The Federal Deposit Insurance Corporation (FDIC) insures deposits at most banks, while the National Credit Union Administration insures deposits at most credit unions. The standard insurance amount is $250,000 per depositor, per deposit insurance ownership category. The ownership category refers to who owns the account, such as a single or joint account, and the account type.

If you have more than $250,000 in a single account, only a portion of your money is protected. The FDIC would guarantee your first $250,000, but the rest would be considered uninsured. However, there are ways to ensure your funds over $250,000 are insured. One way is to open accounts at more than one institution. This strategy works as long as the institutions are distinct. To confirm this, check their FDIC certificate numbers, which are unique to each bank.

Another way to insure funds over $250,000 is to open accounts in different ownership categories. Examples of categories include single, joint, retirement account, trust, business, employee benefit plan, and government. Accounts may need to meet certain requirements to be covered. Additionally, you can use a deposit network. Networks are designed to help depositors insure large sums. IntraFi Network Deposits, for example, divide big deposits into demand deposit accounts, money market deposit accounts, and certificates of deposit at FDIC-insured banks.

For Massachusetts residents or those banking with Massachusetts-based institutions, the Depositors Insurance Fund (DIF) offers unlimited insurance above FDIC limits. This program requires no paperwork or special account structuring – any amount above the FDIC’s $250,000 limit is automatically protected at member banks.

It is important to note that FDIC insurance does not cover stock or mutual fund investments, cryptocurrencies, the contents of safe deposit boxes, life insurance policies, annuities, or municipal securities.

High-yield savings accounts

HYSAs offer the perfect mix of features for holding your emergency savings. Banks reward you for leaving your money on deposit in an HYSA by paying higher rates than most traditional deposit accounts. You can withdraw your money at any time without penalty, although some banks may limit the number of withdrawals you can make per month. HYSAs at banks and credit unions are federally insured, meaning your deposits are protected against bank failures up to the federal limit of $250,000. Most high-yield savings accounts, especially those offered by online banks, have minimal fees.

If you're saving for a long-term goal such as a child's education or retirement, a savings account probably won't generate the returns needed to reach your goal. However, if you're saving for an emergency fund, home down payment, vacation, or other short-term goal, a high-yield savings account is ideal, especially if you want to access the funds as needed.

Some of the best high-yield savings accounts include Axos Bank savings (4.66% APY), BrioDirect savings (4.50% APY), and Newtek Bank savings (4.45%). SoFi Checking and Savings is a combination checking and savings account that earns an APY of 3.80% on the money you keep in the savings portion of the account. To earn that rate, you'll need to enrol in SoFi Plus and set up direct deposit in any amount, deposit a total of at least $5,000 every 30 days using accepted methods, or pay a $10 SoFi Plus subscription fee every 30 days. If you don't meet these qualifications, you'll still earn 1.00% APY on your savings balance.

When it comes to savings accounts, there is no one-size-fits-all approach. Individuals have unique financial needs, values, and goals, which is why there are often multiple types of accounts with varying fees, interest rates, and benefits. Consider your financial habits and future plans to help you determine what makes the most sense for you.

Federal deposit insurance

The Federal Deposit Insurance Corporation (FDIC) is an independent agency established by the US Congress under the Banking Act of 1933. This was in response to the numerous bank failures during the Great Depression, which saw more than one-third of banks fail. The FDIC was created to maintain stability and public confidence in the nation's financial system.

The FDIC provides deposit insurance to depositors in American commercial and savings banks. This insurance is to protect your money in the unlikely event of a bank failure. The FDIC does not, however, cover all types of accounts. For example, stocks, bonds, and mutual funds, including money market funds, are not insured. The basic insurance coverage amount for deposit accounts is USD250,000 per depositor, per ownership category, and per institution. This limit can be exceeded by opening accounts at more than one institution or using a deposit network.

The FDIC also examines and supervises certain financial institutions for safety and soundness, performs consumer-protection functions, and manages the resolution of failed banks. The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. The FDIC charges premiums based on the risk posed by the insured bank.

The Securities Investor Protection Corporation (SIPC), a separate institution chartered by Congress, provides protection against the loss of securities in the event of a brokerage failure. The SIPC insures securities held in investment accounts up to $500,000, with a $250,000 limit for cash.

Securities Investor Protection Corp

Savings accounts are generally insured up to $250,000 per depositor, per ownership category, and per institution. This is the FDIC insurance limit per account. The Federal Deposit Insurance Corporation (FDIC) insures deposits at most banks, while the National Credit Union Administration insures deposits at most credit unions.

Now, let's focus on the Securities Investor Protection Corp (SIPC):

The Securities Investor Protection Corporation (SIPC) is a federally mandated, non-profit, member-funded, US government corporation. It was created under the Securities Investor Protection Act (SIPA) of 1970, which was enacted to prevent an escalation of brokerage firm insolvencies and stabilize the financial markets. The SIPC is neither a government agency nor a regulator of broker-dealers. Instead, it serves to protect investors when a SIPC-member brokerage firm fails financially. This protection covers most types of securities, including stocks, bonds, and mutual funds, up to $500,000, with a $250,000 limit for cash. It's important to note that the SIPC does not protect against investment losses or declines in the market value of securities.

The SIPC has a Board of Directors that determines its policies and consists of seven members, each serving three-year terms. Two members are appointed by the Secretary of the Treasury and the Federal Reserve Board. The SIPC has been protecting investors for over 50 years and has recovered billions of dollars for investors. It is important to note that the SIPC only protects customers of its members, so investors should ensure they only work with firms that are members of the SIPC.

Frequently asked questions