Alyssa Lane
If you have over $250,000 in a bank account, you may want to consider insuring your money. While the odds of your bank failing are low, it is important to know what would happen to your money in that scenario. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per account ownership category, and per institution. However, there are ways to insure more funds. One way is to open multiple accounts at different banks, spreading your money across them. Alternatively, you can use a service like IntraFi Network Deposits, which allows you to keep your money in a single account while still insuring it above the FDIC limit. Another option is to look into state-specific programs, such as the Depositors Insurance Fund (DIF) in Massachusetts, which provides coverage for deposits above the FDIC limit.
| Characteristics | Values |
|---|---|
| Limit per depositor | $250,000 |
| Limit per account ownership category | $250,000 |
| Limit per institution | $250,000 |
| Limit for joint accounts | $500,000 |
| Limit for revocable trust accounts | $250,000 |
| Limit for beneficiaries | $2,500,000 |
| IntraFi Network Deposits limit | $150,000,000 |
| Depositors Insurance Fund (DIF) limit | No limit |
| National Credit Union Administration (NCUA) limit | $250,000 |
| Securities Investor Protection Corporation (SIPC) limit | N/A |
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What You'll Learn
Understanding the Federal Deposit Insurance Corporation (FDIC) rules
The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency that provides insurance to U.S. banks and thrifts in the event of bank failures. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression, to restore trust in the American banking system. More than one-third of banks failed in the years before the FDIC's creation, and bank runs were common.
The FDIC insures deposits placed in savings accounts, money market accounts, checking accounts, and certificates of deposit (CDs). This means that as long as you bank at an insured institution, your money is protected in the event of a bank failure, at least to a certain degree. The FDIC insurance limit is $250,000 per depositor, per insured bank, for each account ownership category. This limit is why depositors with higher balances still have cause for concern, as highlighted by the collapse of Silicon Valley Bank (SVB).
The FDIC recognizes these ownership categories when protecting deposits:
- Individual accounts are owned by one person, with no named beneficiaries.
- Joint accounts have two or more owners but no named beneficiaries.
- Eligible retirement accounts and trust accounts can have one or more beneficiaries.
FDIC insurance extends to all deposit accounts at insured banks, and eligible business accounts are also covered. However, FDIC insurance does not cover instances of fraud, theft, or similar losses, which are handled directly by the banking institution. It also does not cover mutual funds, annuities, life insurance policies, stocks, or bonds.
There are options for insuring high balances above the FDIC limit. Some banks offer programs that extend FDIC insurance coverage beyond the standard limit, allowing for higher amounts to be insured. The Depositors Insurance Fund (DIF) is another option, covering deposit account balances beyond the FDIC limit at member banks. IntraFi Network Deposits, formerly known as CDARS (Certificate of Deposit Account Registry Service), is a program that makes it possible to insure excess deposits by depositing them into accounts at other network banks, each covered up to the FDIC limit.
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Using the Depositors Insurance Fund (DIF)
The Depositors Insurance Fund (DIF) is a private, industry-sponsored insurance fund that provides insurance coverage for deposits above the Federal Deposit Insurance Corporation's (FDIC) $250,000 limit. DIF insurance is only available at member institutions, and currently, about 70 banks offer DIF coverage, all of which are based in Massachusetts.
DIF was established in 1932 by a special act of the Massachusetts legislature after a series of bank failures in the state. It has been protecting depositors since 1934 and no depositor at a DIF-member bank has ever lost money. DIF coverage is not limited by the location of the bank branch or the depositor's residence, so depositors from across the country can access DIF-insured accounts.
DIF-member banks offer full coverage, regardless of the amount in the account. This means that depositors with accounts above the FDIC limit of $250,000 can have peace of mind that their funds are fully protected.
It is important to note that FDIC insurance covers checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs), but does not cover investments such as stocks, bonds, mutual funds, or life insurance policies. DIF insurance fills this gap, providing coverage for deposits beyond the FDIC limit.
By using DIF-insured banks, individuals and businesses can ensure that their deposits are fully insured and protected, even in the unlikely event of a bank failure.
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Spreading money across multiple accounts
IntraFi Network Deposits
IntraFi Network Deposits, formerly known as CDARS (Certificate of Deposit Account Registry Service), is a program that allows you to deposit large amounts of money while staying within FDIC insurance limits. When you place a deposit that exceeds the FDIC limit, IntraFi Network Deposits will spread your money across multiple FDIC-insured banks within its network. Each new account is covered up to the FDIC limit, ensuring that your entire deposit remains insured. This approach allows you to maintain your primary account at your preferred bank while benefiting from the security of FDIC insurance across other banks in the network.
Multiple Institutions
Another approach to spreading money across multiple accounts is to open accounts at different financial institutions. By diversifying your deposits across multiple banks, you can take advantage of the FDIC insurance provided by each institution. This strategy ensures that your deposits are protected up to the FDIC limit at each bank. For example, if you have $500,000 to deposit, you can open two accounts at two different banks, each insured for $250,000. This way, you can rest assured that your money is safe even in the unlikely event of a bank failure.
Different Ownership Categories
In addition to spreading your money across multiple institutions, you can also explore different ownership categories to maximize FDIC insurance coverage. The FDIC recognizes various ownership categories, including individual accounts, joint accounts, and trust accounts. By opening accounts with different ownership structures, you can increase the overall insurance coverage for your deposits. For instance, you could open a joint account with your spouse or partner, effectively doubling the insured amount at a single institution.
Brokerage Accounts
Major brokerage firms, such as Fidelity or Charles Schwab, offer FDIC-insured deposit accounts that are linked to brokerage services. These brokerage cash accounts automatically spread your money across multiple partner banks, ensuring that each deposit is insured up to the FDIC limit. Brokerage accounts can provide the dual benefit of keeping your funds insured while also providing easy access to trading and investment opportunities.
It's important to note that while spreading money across multiple accounts can enhance the insurance coverage for your deposits, it's always advisable to consult with financial professionals who can provide personalized advice based on your specific circumstances. They can guide you in navigating the intricacies of FDIC insurance rules and help you make informed decisions about managing your finances.
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Utilising IntraFi Network Deposits
If you have over $250,000 in a bank account, you may want to look into options for insuring your excess deposits. One way to do this is by utilising IntraFi Network Deposits (formerly known as the Certificate of Deposit Account Registry Service, or CDARS). IntraFi offers a way to insure excess deposits by allowing consumers to spread their money across multiple FDIC-insured banks, each covered up to the FDIC limit.
Here's how it works: IntraFi takes your large deposit and divides it into amounts under the FDIC maximum, placing these in accounts at other network banks. Each new account is covered up to the FDIC limit, providing FDIC insurance for your entire deposit. This way, you can keep your money safe and insured, even if it exceeds the standard deposit insurance limit.
To get started with IntraFi, you can check with your financial institution to see if they offer IntraFi's services. If not, you can use IntraFi's search tool to find a local participating bank. It's important to note that IntraFi itself is not an FDIC-insured bank, but it facilitates placing your deposits in FDIC-insured institutions.
By using IntraFi, you can maintain a single relationship with your chosen local bank while accessing FDIC insurance across multiple institutions. This simplifies the process of insuring excess deposits, as you don't need to manage multiple accounts and logins at different banks.
In addition to the FDIC insurance coverage, IntraFi offers other benefits such as consolidated statements, providing information for each account in one place. IntraFi also provides a range of liquidity options and allows you to diversify your funds across numerous financial institutions, giving you access to enhanced protection and opportunities for growth.
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$159.95
Exploring alternative Impact Deposits
If you are looking to insure large amounts of money, there are several options available. One way is to use a bank network like IntraFi Network Deposits, which spreads your money across multiple FDIC-insured banks, ensuring that you are adequately covered. Impact Deposits Corp. is another similar network that provides insurance protection for excess deposits through its network of almost 200 FDIC-insured community banks.
Another option is to explore the programs offered by some banks that extend FDIC insurance coverage beyond the standard limit, allowing for higher amounts to be insured. For example, Citizens Bank of Edmond offers additional coverage of up to $150 million per depositor through the IntraFi Network.
You could also consider opening accounts with different ownership categories, such as joint accounts or trusts, to increase FDIC insurance coverage. Additionally, major brokerage firms like Fidelity or Charles Schwab offer certain FDIC-insured deposit accounts that automatically spread your money across multiple partner banks, each providing $250,000 in FDIC coverage.
If you prefer a streamlined approach to money management, you might want to consider simply spreading your money across different banks to ensure that your deposits are insured. This option does require some research to find the right banks and compare interest rates and fees.
Overall, there are several alternatives to consider when exploring Impact Deposits and other options for insuring large amounts of money. Each option has its own advantages and considerations, so it is important to carefully review and choose the approach that best aligns with your financial goals and preferences.
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Frequently asked questions
The FDIC insures up to $250,000 per depositor, per account ownership category, and per institution.
If you have over $250,000 in your bank account, you can use beneficiaries to insure over $1 million. You can also use the Depositors Insurance Fund (DIF), which covers deposit account balances beyond the $250,000 FDIC limit at member banks.
You can use the FDIC BankFind tool to locate member banks in your area.
IntraFi Network Deposits, formerly known as CDARS, is a program that makes it possible to insure excess deposits. It uses demand deposit accounts, money market accounts, and CD accounts at participating financial institutions.
