Alyssa Lane
The Federal Deposit Insurance Corporation (FDIC) provides insurance for deposits in all types of accounts at FDIC-insured banks. FDIC insurance covers deposits in traditional accounts, including single ownership accounts, joint ownership accounts, and trust accounts. The coverage is automatic and free for customers, protecting their money in the event of bank failure. As of April 1, 2024, the FDIC provides a maximum coverage of $1,250,000 for trust owners with five or more beneficiaries, while the coverage limit for most other accounts is $250,000. It's important to note that FDIC insurance does not cover non-deposit investment products, even if they are offered by FDIC-insured banks.
| Characteristics | Values |
|---|---|
| Type of accounts insured | Traditional deposit accounts |
| Coverage | Dollar-for-dollar, including principal and accrued interest |
| Maximum insurance coverage for trust owners with 5+ beneficiaries | $1,250,000 per owner for all trust accounts |
| Maximum insurance coverage for single ownership accounts | $250,000 |
| Maximum insurance coverage for joint ownership accounts | $250,000 |
| Maximum insurance coverage for prepaid cards | $250,000 |
| Conditions for coverage | Money must be held in a deposit account at an FDIC-insured bank |
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What You'll Learn
FDIC insurance covers deposits in all types of accounts
FDIC deposit insurance protects your money in the event of a bank failure. Since the FDIC was founded in 1933, no depositor has lost any FDIC-insured funds. The FDIC helps maintain stability and public confidence in the US financial system by insuring deposits of up to $250,000 per depositor, per ownership category, at each FDIC-insured bank. This means that if you have multiple accounts in different ownership categories, you may qualify for more than $250,000 in total FDIC deposit insurance coverage.
For example, 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 for up to $250,000 for the combined balance of your checking and savings accounts, and an additional $250,000 for the funds in your IRA, as it is in a different ownership category.
It is important to note that FDIC insurance only covers deposits and does not cover non-deposit investment products, even if they are offered by FDIC-insured banks. Additionally, FDIC deposit insurance does not cover default or bankruptcy of any non-FDIC-insured institution.
To learn more about FDIC insurance coverage for specific types of accounts, you can refer to the "Your Insured Deposits" brochure, which provides a comprehensive description of FDIC deposit insurance for the most common account ownership categories.
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FDIC insurance covers joint accounts
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. FDIC deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's failure. FDIC insurance covers joint accounts owned in any manner conforming to applicable state law, such as joint tenants with the right of survivorship, tenants by the entirety, and tenants in common. All co-owners must be living people. Legal entities such as corporations, trusts, estates, or partnerships are not eligible for joint account coverage. All co-owners must have equal rights to withdraw deposits from the account.
FDIC insurance covers each co-owner's share of all joint accounts at the same bank and insures each co-owner's total up to $250,000. If you are also a joint owner on accounts with no beneficiaries at other FDIC-insured banks, your share of all joint accounts at each bank would be insured up to $250,000 per bank. By designating beneficiaries to single and joint accounts (frequently referred to as a Payable on Death or "POD" designation), you can increase the insured balance of an account. For example, if a couple has three joint accounts totalling $600,000 at an insured bank, each co-owner's shares of the three accounts are added together and insured up to $250,000 per owner, providing up to $500,000 in coverage for the couple's joint accounts.
The FDIC combines all single accounts owned by the same person at the same bank and insures the total up to $250,000. The balances of all self-directed retirement accounts for the same person at the same bank are added together and insured up to $250,000. As of April 1, 2024, the maximum insurance coverage for a trust owner with five or more beneficiaries is $1,250,000 per owner for all trust accounts (including POD/ITF, revocable, and irrevocable trusts) held at the same bank. Depositors can name as many beneficiaries as they wish, however, the coverage limit will not exceed $1,250,000 as of April 1, 2024.
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FDIC insurance covers trust accounts
For trust accounts, FDIC insurance coverage is calculated by multiplying the number of eligible beneficiaries by $250,000, with an overall maximum insurance amount of $1,250,000 per owner for five or more beneficiaries. This maximum coverage limit applies to all trust accounts held at the same bank. It's important to note that the FDIC does not limit the number of beneficiaries a depositor may identify on a trust account. However, to be considered an eligible beneficiary, the beneficiary must be a living person, a charity, or a non-profit organization.
In the case of joint accounts, FDIC insurance covers these accounts as long as they are owned in a manner conforming to applicable state law. All co-owners must be living people, have equal rights to withdraw deposits, and sign a deposit account signature card. If these requirements are met, each co-owner's shares of joint accounts are added together, and the total is insured up to a certain limit.
It's important to distinguish between formal and informal trust accounts. Formal trust accounts, both revocable and irrevocable, require beneficiaries to be identified in the formal trust document, while informal revocable trusts name beneficiaries in the bank's deposit account records. The FDIC does not consider the beneficiaries to be the owners of the deposited funds and, in the event of bank failure, pays deposit insurance to the trust's owner rather than the beneficiaries.
Additionally, FDIC insurance coverage extends to employee benefit plan accounts, such as pension plans, but does not insure the plan itself. Instead, it insures the deposit accounts owned by the plan, with investment and management decisions controlled by a plan administrator.
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FDIC insurance covers prepaid cards
It is important to note that FDIC insurance for prepaid cards only applies when a bank fails. It does not cover losses due to theft or fraud, or if the card provider declares bankruptcy. In the case of bank failure, the FDIC acts quickly to ensure that all depositors, including prepaid cardholders, receive prompt access to their insured deposits. FDIC deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's failure.
FDIC deposit insurance is only available for money deposited at an FDIC-insured bank. It is important to understand that banks offer financial products and services that are not deposits, and the FDIC does not insure them. Coverage is automatic when you open one of the eligible types of accounts at an FDIC-insured bank. These include traditional deposit accounts such as joint accounts, employee benefit plans, and trust accounts.
In addition to FDIC insurance, cardholders may have protection under state money transmitter laws, which apply to non-bank businesses that facilitate consumer payments. These laws ensure the security of consumers' funds, including prepaid card balances, in the event of business failure. To determine if a card issuer is covered by money transmitter laws in a specific state, individuals can contact their state's department of financial institutions or a similar agency.
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FDIC insurance does not cover non-deposit investment products
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. FDIC insurance covers deposits in all types of accounts at FDIC-insured banks, but it is important to note that it does not cover non-deposit investment products, even those offered by FDIC-insured banks.
FDIC deposit insurance covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category. All of your deposits in the same ownership category in the same FDIC-insured bank are added together for the purpose of determining FDIC deposit insurance coverage. However, you may qualify for more than $250,000 in FDIC deposit insurance coverage if you deposit money into accounts that are in different ownership categories. For example, a revocable trust account (including living trusts and informal revocable trusts commonly referred to as payable on death (POD) accounts) with one owner naming three unique beneficiaries can be insured up to $750,000.
Depositors do not need to apply for or purchase FDIC deposit insurance. Coverage is automatic whenever a deposit account is opened at an FDIC-insured bank. If you want your funds insured by the FDIC, simply place your funds in a deposit account at an FDIC-insured bank and make sure that your deposit does not exceed the insurance limit for that ownership category. You can determine if a bank is FDIC-insured by asking a bank representative, looking for the FDIC sign at your bank, or using the FDIC's BankFind tool, which allows you to access detailed information about all FDIC-insured institutions.
It is important to remember that FDIC deposit insurance does not cover non-deposit investment products, such as stocks, bonds, mutual funds, and cryptocurrency. These types of investment options are not insured by the FDIC, even if they are offered by FDIC-insured banks. FDIC insurance only covers deposit accounts, such as checking accounts, savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs). Therefore, if you have investments in non-deposit products, you should be aware that they are not protected by FDIC insurance in the event of a bank failure.
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Frequently asked questions
FDIC insurance covers deposits in all types of accounts at FDIC-insured banks. This includes traditional deposit accounts and joint accounts.
FDIC insurance covers deposits up to $250,000 for single ownership accounts and $1,250,000 for trust owners with five or more beneficiaries, as of April 1, 2024.
No, FDIC insurance only covers cash in deposit accounts at FDIC-insured banks. It does not cover non-deposit investments or investment products, even if they are offered by FDIC-insured banks.
