Loading the player...

What is the 'Federal Deposit Insurance Corporation - FDIC'

The Federal Deposit Insurance Corporation (FDIC) is the U.S. corporation insuring deposits in the United States against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. The FDIC insures deposits of up to $250,000 per institution, as of 2016, as long as the bank is a member firm.

Before opening an account with a financial institution, be sure to confirm that it is FDIC insured.

BREAKING DOWN 'Federal Deposit Insurance Corporation - FDIC'

The main purpose of the Federal Deposit Insurance Corporation (FDIC) is to prevent the kind of "run on the bank" scenarios that devastated many banks during the Great Depression. Before FDIC, there was no guarantee beyond the bank's own stability. This meant that only those who were first to withdraw their money from a troubled bank would get it; those who waited stood the risk of losing their life savings overnight. As fear of bank closures started to spread, a small trickle of worried customers looking to withdraw money would soon turn into a stampede until the bank was unable to meet the withdrawal requests.

The FDIC Difference

Since practically all banks and thrifts now offer FDIC coverage, the customers have no reason to panic even if the institution falls on hard times. In case of bank failure, the FDIC covers deposits up to $250,000, which is more than enough for the majority of customers. Thus, no run on the bank is triggered, and the bank has a fighting chance to sort out its troubles under controlled circumstances.

What Accounts Are Covered?

Checking accounts, savings accounts, Certificates of Deposit (CDs) and money market accounts are generally 100% covered by FDIC. Some trust accounts and Individual Retirement Accounts (IRAs) are covered, but only the parts that fit the type of accounts listed above. FDIC insurance does not cover any type of investment product, such as mutual funds, annuities, life insurance policies, stocks or bonds. The contents of safe-deposit boxes are not included in FDIC coverage either. Cashier's checks and money orders issued by the failed bank remain fully covered by FDIC.

Contacting FDIC

A customer can file a claim with FDIC as early as the day after a bank or thrift folds. The claim can be filed online through the FDIC website. A phone hotline allows bank customers to get personalized assistance at no cost, by calling 877-275-3342 (1-877-ASKFDIC).

Note that FDIC only insures against bank failures. Instances of fraud, theft and similar loss are handled by the bank.

RELATED TERMS
  1. Advance Dividend

    An estimate of the present value of an asset being liquidated ...
  2. Assisted Merger

    The merger of two or more financial institutions undertaken with ...
  3. Modified Payoff

    The partial insurance reimbursement that is paid to depositors ...
  4. Deposit Insurance Fund - DIF

    A fund that is devoted to insuring the deposits of individuals ...
  5. Capital Loss Coverage Ratio

    The difference between an asset’s book value and the amount received ...
  6. Certificate of Deposit Account ...

    A program that allows the public to spread money around various ...
Related Articles
  1. Insurance

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  2. Investing

    Who Backs Up The FDIC?

    The FDIC insures depositors against loss, but what happens if it runs out of money?
  3. Investing

    FDIC Sues Bank of America Over Deposit Insurance

    In a lawsuit filed Monday, the FDIC says Bank of America owes at least $542 million for deposit insurance.
  4. Small Business

    A New Plan To Prevent Future Bailouts

    This new and innovative plan by the FDIC could help the government avoid the next bailout.
  5. Personal Finance

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  6. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  7. Personal Finance

    The 7 Best Places To Put Your Savings

    You work hard to put your money away for the future, but where you should you keep it?
  8. Investing

    Bank Failure: Will Your Assets Be Protected?

    The SIPC and FDIC insure against personal financial ruin when banks or brokerages go belly up.
RELATED FAQS
  1. Why are CDs (Certificate of Deposit) FDIC-insured?

    Find out why certificate of deposits (CDs) are insured by the FDIC and what the deposit requirements are for receiving insurance ... Read Answer >>
  2. Why is my 401(k) not FDIC-Insured?

    Learn about the Federal Deposit Insurance Corporation (FDIC) and whether its protection extends to 401(k) accounts or just ... Read Answer >>
  3. Does the FDIC cover identity theft?

    Learn whether or not identify theft is covered by the FDIC, and find out what steps you can take to prevent or report identity ... Read Answer >>
  4. Is my IRA/Roth IRA FDIC-Insured?

    Understand how the Federal Deposit Insurance Corporation protects certain accounts, and learn if traditional and Roth IRAs ... Read Answer >>
  5. Why are mutual funds not FDIC-insured?

    Discover why mutual funds are not insured by the FDIC, and learn what protection is offered for these and other similar financial ... Read Answer >>
Hot Definitions
  1. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  2. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  3. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  4. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
Trading Center