The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the US government that protects you against loss of deposit if your bank or thrift institution 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. In addition, the FDIC does not insure regular shares and share draft accounts of credit unions. Similar to the FDIC, the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NCUA), insures accounts at credit unions.
What is Covered?
The FDIC insures many types of accounts at banking and thrift institutions. The insurance covers the principal and interest of an account, not exceeding the $250,000 limit. For a list of the types of accounts and how they are covered, see the chart below:
|What and How Much Is Covered?|
|Single Account||$250,000 per owner|
|Certain Retirement Account||$250,000 per owner|
|Joint Account||$250,000 per co-owner|
|Revocable Trust||Owner is insured $250,000 per beneficiary|
|Irrevocable Trust||$250,000 for the trust; additional coverage is available under specific conditions.|
|Employee Benefit Plan||$250,000 for the noncontingent interest of participants|
|Corporation, Partnership, or Unincorporated Association Account||$250,000 per entity|
|Government Account||$250,000 per custodian|
- Not all banks or thrift institutions are insured by the FDIC.
- Eligible bank accounts are insured up to $250,000 for principal and interest.
- The FDIC does not insure share accounts at credit unions.
The Advisor Insight
Jeff Rose, CFP®
Alliance Wealth Management, Carbondale, IL
In general, nearly all banks carry FDIC insurance for their depositors. However, there are two limitations to that coverage. The first is that only depository accounts, such as checking, savings, bank money market accounts, and CDs are covered.
The second is that 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. If you have $500,000 that you want to be held in a bank account, you can put $250,000 in one bank and $250,000 in another bank. Just remember that they need to be completely unrelated banks. The coverage is not segregated by branches within the same banking institution.