FDIC Insured

From LoveToKnow Insurance

If an FDIC insured bank or savings association fails, depositor's account balances are protected up to specific limits based on the type of account. The more you know about FDIC insurance protection, the better prepared you will be if your bank or savings association fails.

Most bank deposits are insured by the FDIC.

FDIC Insurance Protects Depositors

In 1933, the Federal Deposit Insurance Corporation (FDIC) was created as an independent agency of the United States government. The purpose of the FDIC is to protect depositors against the loss of their deposits if their FDIC insured bank or savings association should fail. FDIC insurance is backed by the funds of the United States government.

A bank must meet extremely high standards for financial strength and stability In order to be an FDIC insured bank. Federal and state regulatory agencies review the bank's operations and financial records on a regular basis to make sure that these standards are met.

Account Types Insured

Even with the high standards set by the FDIC, an insured bank can implement a policy or procedure that may cause the bank to eventually have financial trouble. In some cases, the bank may fail. If an FDIC insured institution fails, your deposits are covered as well as any interest accrued up to the date of the bank failure.

All types of deposit accounts are covered including:

  • Checking accounts
  • Interest-bearing checking accounts
  • Money market checking accounts
  • Savings accounts
  • Certificates of Deposit (CDs)
  • Coverdell education savings accounts
  • Health savings accounts
  • Medical savings accounts
  • 403(b) accounts
  • Individual Retirement accounts (IRAs) owned by one person for their personal retirement including:
    • Traditional IRAs
    • Roth IRAs
    • Simplified Employee Pension (SEP) IRAs
    • Savings Incentive Match Plans for Employees (SIMPLE) IRAs
  • Section 457 deferred compensation plan accounts
  • Self-directed defined contribution plan accounts
  • Self-directed Keogh plan accounts
  • H.R. 10 plan accounts
  • Trust accounts
  • Employee benefit plan accounts
  • Corporation, partnership and unincorporated association accounts
  • Government accounts (deposits by city, county, state, federal, or Indian tribes)

Account Types Not Insured

FDIC insurance does not cover:

  • U.S. Treasury bills or bonds. The balances on these instruments are insured by the United States government, but they are not insured by the FDIC.
  • Money invested in stocks, bonds, mutual funds, life insurance policies, mortgage life insurance, annuities or municipal securities, even if they were purchased through an FDIC insured bank or savings association.
  • The contents of safe deposit boxes. (The boxes become the property of the acquiring bank, if any. If the bank is not acquired, box holders would be sent instructions of how they can remove the contents of their boxes.)

Limits of Coverage

All depositors are covered. You do not have to be a United States citizen or resident for your deposits to be covered.

The FDIC coverage is provided dollar-to-dollar for all balances. On October 3, 2008 the coverage was temporarily increased from $100,000 to $250,000 per depositor per insured bank. Retirement accounts which are owned by one person for their personal use are insured up to $250,000 per depositor per insured bank. The coverage also includes any interest earned on the account through the closing date of the insured bank or savings association.

For example, if Sally Lee had personal deposits and deposits for her sole proprietorship business totaling $300,000, she would be insured up to $250,000, leaving $50,000 uninsured.

FDIC Coverage For One Depositor
Account
Owner		Type of
Account		 Amount
Balance
Sally LeePersonal Checking$25,000
Sally LeeSavings$30,000
Sally LeeCD$225,000
Sally Lee's BoutiqueBusiness Checking$20,000
Total Deposits$300,000
Amount Insured$250,000
Amount Uninsured$50,000

If a deposit account or CD is owned by two or more people, and if the owners have equal rights to withdraw money from the account, each owner is insured up to $250,000. For example, as shown in the box, if John and Mary were equal owners of a $550,000 CD, only $500,000 of their CD deposit would be covered by FDIC insurance.

FDIC Coverage on Jointly-Owned CD
Account
Owner		Ownership
Share		 Amount
Insured		Amount
Uninsured
John Smith$275,000$250,000$25,000
Mary Smith$275,000$250,000$25,000
Total$550,000$500,000$50,000

The FDIC has an online Electric Deposit Insurance Estimator (EDIE) that can help you calculate the insurance coverage of your deposit accounts. EDIE will calculate coverage for as many as 40 personal and business accounts owned or co-owned by a depositor. EDIE will also calculate up to, and beyond, the $250,000 amount.

When a Bank Closes

The federal law mandates that the FDIC make payments on the insured deposits as soon as possible to depositors. This payment is usually made within a few days, either by giving the account holder a check or by depositing the money into an account for the depositor at another insured bank.

Depositors would not be able to receive payments on their uninsured deposits until the bank's assets are sold. This can take several years. There is no guarantee that a depositor will receive any or all of their uninsured deposits.

Finding FDIC Insured Banks

Banks and savings associations which are insured by the FDIC have an official FDIC sign placed where the deposits are received. The sign is usually visible on the front door, next to the tellers and on a sign close to the staff member who opens new accounts.

To check in your bank or savings association is FDIC insured, you can also:

  • Check online using Bank Find
  • Call the FDIC at 877-275-3342

Tips for Deposit Safety
  • Keep your contact information current on your accounts to minimize any delay in getting your insured funds returned to you.
  • Limit the size of your total deposits to stay within the FDIC protection limits.
  • Spread your deposits between different banks.
  • If two of your banks merge, review the balances on your deposit accounts, restructuring the accounts where necessary to stay within the FDIC protection limits.
  • Don't panic if your bank closes:
    • You will receive your insured deposits within a few days.
    • You should continue to pay any credit card, loan or mortgage payments on time and to the same address until told otherwise in writing from the bank. This will let you avoid late charges.

More Information on FDIC Insurance

This article includes the basic information about FDIC insurance. Different types of accounts and different types of account ownerships may have different limits of coverage.

For information about your particular account situation, you should contact the FDIC directly:

Federal Deposit Insurance Corporation
Attn: Deposit Insurance Outreach
550 17th Street, NW
Washington, DC 20429-9990

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