
FDIC insurance is a safety net for your deposits, but how much does it actually cover? The standard FDIC insurance coverage is $250,000 per depositor, per insured bank.
This means that if you have a joint account with your spouse, you're both covered up to $250,000. You can have multiple accounts at the same bank, and each account is insured separately.
For example, if you have a checking account, a savings account, and a certificate of deposit (CD) at the same bank, each account is covered up to $250,000.
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What Is Covered?
FDIC insurance covers a wide range of deposit accounts, including checking accounts.
If you have a checking account, you're in the clear - it's one of the many types of accounts that FDIC insurance covers.
Savings accounts, including high-yield savings accounts, are also covered.
You'll be happy to know that negotiable order of withdrawal (NOW) accounts and money market deposit accounts (MMDAs) are also eligible for FDIC insurance.
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Time deposits, such as certificates of deposit (CDs), are covered as well.
You can also rely on FDIC insurance for cashier's checks, money orders, and other official items issued by a bank.
Here are some examples of accounts that are covered by FDIC insurance:
- Checking accounts
- Savings accounts (including high-yield savings accounts)
- Negotiable order of withdrawal (NOW) accounts
- Money market deposit accounts (MMDAs)
- Time deposits such as certificates of deposit (CDs)
- Cashier's checks, money orders and other official items issued by a bank
On the other hand, FDIC insurance doesn't cover investment accounts, such as stock investments, bond investments, and mutual funds.
Some other items that are not covered by FDIC insurance include crypto assets, life insurance policies, annuities, municipal securities, safe deposit boxes or their contents, and U.S. Treasury bills, bonds or notes.
Understanding Coverage
FDIC deposit insurance covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category. The FDIC has different ownership categories, including Single Accounts, Joint Accounts, Certain Retirement Accounts, Trust Accounts, Employee Benefit Plan Accounts, Corporation/Partnership/Unincorporated Association Accounts, and Government Accounts.
If you have a single ownership account at an FDIC-insured bank 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 also insured separately for your ownership interest up to $250,000 for all of your joint ownership account deposits.
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You can qualify for more than $250,000 in FDIC deposit insurance coverage if you deposit money in accounts that are in different ownership categories. For example, if you have a single ownership account, a joint ownership account, and a retirement account, you can be insured for up to $750,000.
Here's a breakdown of the FDIC coverage limits by type of account owner category:
The FDIC provides separate insurance coverage for deposits held in different categories of legal ownership. This means that depositors may qualify for more than $250,000 in insurance coverage if they have funds deposited in different ownership categories and all FDIC requirements for each ownership category are met.
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Calculate Coverage
Calculating your FDIC insurance coverage can be a bit complex, but don't worry, I've got you covered. You can use the FDIC's online Electronic Deposit Insurance Estimator (EDIE) to calculate how much of your funds are covered by deposit insurance.
The FDIC provides separate insurance coverage for deposits held in different categories of legal ownership, also known as ownership categories. These categories include single accounts, joint accounts, certain retirement accounts, trust accounts, employee benefit plan accounts, corporation/partnership/unincorporated association accounts, and government accounts.
To calculate your coverage, you need to add up all your deposits in the same ownership category at the same FDIC-insured bank. For example, if you have a single ownership account and a joint ownership account at the same bank, you'll be insured for up to $250,000 for your single ownership account deposits and also insured separately for your ownership interest up to $250,000 for all of your joint ownership account deposits.
Here's a breakdown of the FDIC coverage limits for different ownership categories:
Remember, if you have funds deposited in separate branches of the same insured bank, they are not separately insured. However, if you have funds deposited in different ownership categories, you may qualify for more than $250,000 in insurance coverage.
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Bank Failure and Protection
Bank failure is a rare occurrence, but it's essential to understand how the FDIC protects your money. In the unlikely event of a bank failure, the FDIC acts quickly to ensure that all depositors get prompt access to their insured deposits.
The FDIC pays depositors by giving them an account at another insured bank in the amount equal to what they had at the failed bank, up to the insurance limits. If there's no bank to acquire the deposits, the FDIC simply issues the depositor a check within a few days.
The FDIC's deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit of $250,000 per owner, per ownership category. This includes principal and any accrued interest through the date of the insured bank's failure.
Here's a breakdown of the FDIC's deposit insurance coverage limits by account ownership category:
Bank Failures and Deposit Protection
The FDIC protects depositors against bank failures, but it doesn't cover losses due to theft or fraud. In the unlikely event of a bank failure, the FDIC acts quickly to ensure depositors get prompt access to their insured deposits.
The FDIC's deposit insurance coverage limits vary by account ownership category. For single accounts, the limit is $250,000 per owner. Joint accounts, on the other hand, are insured up to $250,000 per co-owner.
Certain types of accounts, such as retirement accounts, are also insured up to $250,000 per owner, regardless of the number of beneficiaries. Trust accounts can be insured up to $250,000 per beneficiary, using a specific formula.
The FDIC pays depositors back after a bank fails by giving them an account at another insured bank, up to the insurance limits. If there's no bank to acquire the deposits, the FDIC issues a check within a few days.
Here are the FDIC deposit insurance coverage limits by account ownership category:
The FDIC's deposit insurance fund is backed by the full faith and credit of the United States government and has two sources of funds: assessments from FDIC-insured institutions and interest earned on funds invested in U.S. government obligations.
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Uninsured Financial Products
Stock investments are not covered by FDIC insurance. This includes any stocks you may have purchased, no matter where you bought them.
Bond investments are also not insured, so if you've invested in bonds, you should be aware that you're not protected.
Municipal securities are not FDIC-insured either. This means that if you've invested in municipal bonds, you're not covered.
Mutual funds, including money market funds, are not insured by the FDIC. This includes funds that you may have invested in through your bank.
Life insurance policies are not FDIC-insured, so if you've purchased a life insurance policy, it's not protected.
Safe deposit boxes and their contents are not covered by FDIC insurance. This includes any valuable items you may have stored in a safe deposit box.
U.S. Treasury bills, bonds, or notes are not insured by the FDIC. This means that if you've invested in these types of securities, you're not protected.
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Exchange traded funds are also not FDIC-insured. This includes any ETFs you may have invested in through your bank.
Annuities are not covered by FDIC insurance. This includes any annuity contracts you may have purchased.
Here are some examples of non-deposit products that are not insured by the FDIC:
- Stock investments
- Bond investments
- Municipal securities
- Mutual funds (including money market funds)
- Life insurance policies
- Safe deposit boxes or their contents
- U.S. Treasury bills, bonds or notes
- Exchange traded funds
- Annuities
These types of products are not deposits and may lose value.
Frequently Asked Questions
Is $500,000 in a joint account FDIC-insured?
Yes, joint accounts with up to $500,000 in a single bank are fully FDIC-insured. However, the FDIC insurance coverage is split between co-owners, with each owner's share insured up to $250,000.
What happens if you have more than 250k in the bank?
If you have more than $250,000 in the bank, you're not fully insured in case of a bank failure, and you could lose the excess amount
How do I insure $2 million in the bank?
To insure a large sum like $2 million, consider opening multiple accounts at different banks and credit unions, and exploring brokerage accounts, to maximize coverage under FDIC insurance limits. By diversifying your deposits, you can ensure your funds are protected up to $2 million.
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