Are all bank accounts insured by the FDIC?
Many people assume that all bank accounts are FDIC insured, sadly this is not the case. Likewise, not all money you deposit into an account with FDIC will be covered by the insurance. Accounts are generally insured for just the first $250,000 per account.
I don’t often recommend most people leave this kind of money sitting in a bank account. Especially with today’s low interest rates. If you must have this kind of cash sitting around, you may want to have accounts at more than one institution.
Yours in Success
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Hi! Thanks for writing….good question, and the answers already given here are perfect. As the other advisors have written, if you keep money in a bank or credit union, you have Federal Depository Insurance Corporation (FDIC) or bank account insurance. This benefit insures up to $250,000 per owner against fraud, default, or bankruptcy by the bank.
As advisor Joseph Carbone writes, stocks and money market accounts are not insured by FDIC However, these are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000 with specific requirements. SIPC insurance protects your investments from fraud or bankruptcy of the investment house that holds the investments, not the actual company you’ve invested in; it doesn’t insure against losses you were to incur because of errors or unfortunate decisions in your investment choices. For example, you were to use Etrade to buy shares of Nike stock and Etrade itself were to go bankrupt, SIPC insurance would help; if Nike were to go bankrupt, you’d lose all the money you’d invested.
Please write again if we can answer any other questions!
In general, nearly all banks do carry FDIC insurance for their depositors. However, there are two limitations with that coverage. The first is that only depository accounts, such as checking, savings, bank money market accounts and certificates of deposit are covered by the insurance. Other types of investments that you may hold through a bank, such as stocks, bonds, or mutual funds, are not covered.
The second limitation is the amount of money on deposit. FDIC insurance is limited to $250,000 per depositor, per bank. That means that if you have $500,000 sitting in one bank, only half of the money would be insured.
The way to get around this limitation is to spread your money across more than one bank. That means that if you have $500,000 that you want held in a bank account, you can put $250,000 in one bank, and $250,000 in another bank. Just remember that means completely unrelated banks. The coverage is not segregated by branches within the same banking institution.
FDIC insurance coverage depends on two things, whether your chosen financial product is deposit product, and whether your bank is FDIC-insured.
Here are the accounts that are covered;
- Checking Accounts
- Negotiable Order of Withdrawal (NOW Accounts)
- Savings Account
- Money Market Deposit Accounts (MMDAs)
The FDIC Does not cover;
- Mutual Funds
- Exchange Traded Funds (ETFs)
- Life Insurance Products
- Municipal Securities
- Safe deposit boxes
- US Treasury bills, bonds or notes
Joseph Carbone, Jr., CFP®, AIF®
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects you against loss of deposit if your bank is FDIC insured. Banks are not mandated to be FDIC insured, but being insured has become a point of competition among banking institutions. In other words, a bank that is not FDIC insured cannot compete effectively in an industry where consumers have come to expect their money to be protected. To see if your bank is FDIC insured, you can go to the FDIC Bank Find page.
The FDIC does not insure all accounts held at an insured bank. The types of bank accounts insured by the FDIC include negotiable order of withdrawal (NOW), money market deposit account (MMDA), checking, savings and certificate of deposit (CD) accounts. These accounts are insured for up to $250,000 per account. Financial instruments such as stocks, bonds and money market funds, U.S. Treasury securities (T-bills), safe deposit boxes, annuities, and insurance products are not insured by the FDIC.
To learn more, read our related article Are Your Bank Deposits Insured?