The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. As of 2018, the FDIC insures deposits up to $250,000 per depositor as long as the institution is a member firm. It is critical for consumers to confirm if their institution is FDIC insured.
The primary purpose of the Federal Deposit Insurance Corporation (FDIC) is to prevent "run on the bank" scenarios, which devastated many banks during the Great Depression. For example, with the threat of the closure of a bank, small groups of worried customers rushed to withdraw their money. After fears spread, a stampede of customers, seeking to do the same, ultimately resulted in the bank being unable to support withdrawal requests. Those who were first to withdraw their money from a troubled bank would benefit, whereas those who waited risked losing their savings overnight. Before FDIC, there was no guarantee for the safety of deposits beyond the confidence in the bank's stability.
Because practically all banks and thrifts now offer FDIC coverage, many consumers face less uncertainty regarding their deposits. In case of bank failure, the FDIC covers deposits up to $250,000, which is adequate for the majority of depositors. As a result, banks have a better opportunity to address problems under controlled circumstances, without triggering a run on the bank.
Checking accounts, savings accounts, certificates of deposit (CDs) and money market accounts are generally 100% covered by FDIC. Coverage extends to trust accounts and individual retirement accounts (IRAs), but only the parts that fit the type of accounts listed previously.
FDIC insurance does not cover products such as mutual funds, annuities, life insurance policies, stocks, or bonds. The contents of safe-deposit boxes are also not included in FDIC coverage. Cashier's checks and money orders issued by the failed bank remain fully covered by FDIC.
Eligible business accounts from a corporation, partnership, LLC or unincorporated organization at a bank are FDIC-covered.
A customer can file a claim with FDIC as early as the day after a bank or thrift folds. The request can be submitted online through the FDIC website. By calling 877-275-3342 (1-877-ASKFDIC), bank customers can receive personalized assistance at no cost.
Note that FDIC only insures against bank failures. Instances of fraud, theft, and similar loss are handled directly by the institution. The FDIC has no jurisdiction over identity theft.